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29 July, 17:18

Bulldog, Inc., has sold Australian dollar put options at a premium of $.02 per unit, and an exercise price of $.89 per unit. It has forecasted the Australian dollar's rate over the period of concern as $.86, $.87, $.88, $.89, $.91 and $.92. Determine the net profit (or loss) per unit to Bulldog, Inc., if Australia dollar each level occurs (show detailed analysis; follow the five steps in the teaching notes).

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  1. 29 July, 17:21
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    Answer: for each dollar rate we get

    -$.01

    $.00

    $.01

    $.02

    $.04

    $0.5

    Explanation: exercise price-premium price=$.89-$.02=$.87

    Therefore we are to subtract $.87 from each forcasted dollar rate to get the net profit or loss per each.

    $.86-$.87=-$.01

    $.87-$.87=$.00

    $.88-$.87=$.01

    $.89-$.87=$.02

    $.91-$.87=$.04

    $.92-$.87=$.05
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