Call Option on £10,000

Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €15,000. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/£. The current interest rates are i€ = 3% and are i£ = 4%. A. €3,275 B. €3,373 C. €2,500 D. €3,243

Find the hedge ratio for a call option on £10,000 with a strike price of €15,000. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/£. The current interest rates are i€ = 3% and are i£ = 4%. A. 2/3 B. 8/13 C. 3/8 D. 5/9

Today's settlement price on a Chicago Mercantile Exchange (CME) Yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME Yen contract is ¥12,500,000). If you have a short position in one futures contract, the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be: A. $2,325 B. $3,425 C. $2,000 D. $1,425

The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. If you pay an option premium of $5,000 to buy this call, at what exchange rate will you break-even? A. $1.50 = €1.00 B. $1.62 = €1.00 C. $1.68 = €1.00 D. $1.58 = €1.00

Yesterday, you entered into a futures contract to buy €62,500 at $1.50/€. Your initial margin was $3,750 (i.e., 4 percent of the contract value in dollars = 0.04 x€62,500x$1.50/€ ). Your maintenance margin is $2,000 (meaning that your broker leaves you alone until your account balance falls to $2,000). At what settle price (use 4 decimal places) do you get a margin call? A. $1.4720/€ B. $1.4930/€ C. $1.5280/€ D. $1.500/€