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5. (5 pts.) The current spot exchange rate is $1.55 1.00 and the three-month forward rate is $1.6...


5. (5 pts.) The current spot exchange rate is $1.55 1.00 and the three-month forward rate is $1.60 1.00. Consider a three-mon
5. (5 pts.) 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 S 1.50·ei .00, if you pay an option premium of $5,000 to buy this call, at what exchange rate will you break-even?
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Breakeven exchange rate is given as equal to

=strike rate+premium/contract size

=5000/62500+1.50=1.58$/€

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5. (5 pts.) The current spot exchange rate is $1.55 1.00 and the three-month forward rate is $1.6...
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