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Mathematics, 12.06.2020 19:57 caitlinsanders

. Auburn Co. has purchased Canadian dollar put options for speculative purposes. Each option was purchased for a premium of $.02 per unit, with an exercise price of $.86 per unit. Auburn Co. will purchase the Canadian dollars just before it exercises the options (if it is feasible to exercise the options). It plans to wait until the expiration date before deciding whether to exercise the options. In the following table, choose only one spot rate and find the net proļ¬t (or loss) per unit to Auburn Co. based on possible spot rate of the Canadian dollar on the expiration date.

Possible Spot Rate of Canadian Dollar per Unit on Expiration Date
Net Proļ¬t (Loss) to Auburn Co.
$.76

.79

.84

.87

.89

.91

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. Auburn Co. has purchased Canadian dollar put options for speculative purposes. Each option was pu...
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