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  3. (problem 2, pomis) consider a european put option

(Problem 2, pomis) Consider a European put option on British pounds with an exercise price...

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Accounting

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(Problem 2, pomis) Consider a European put option on British pounds with an exercise price of $1.58/ You pay an option premium of $0.06/to buy the put option today. You decide whether to exercise the put option on the expiration date. a. (8 points) In the following table, fill in the option payoff per pound as well as net profit (or loss) per pound based on the listed possible spot rates of dollars per pound (S/E) on the expiration date (Net profit or loss - Payoff - Premium). Possible spot rate of $1.46 $1.50 $1.52 $1.60 $1.64 dollars per pound on expiration date Option payoff per pound Net profit (loss) per pound b. (3 points) At what spot rate of dollars per pound on the expiration date would you break-even (profit - 0)? c. (4 points) Draw the profit profile of buying a put option (the profit line and labels for X-axis and y-axis are sufficient)

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