Question 2. (4+3 points)
i) Abdul sold a call option on British pounds for $.05 per unit. The exercise price was $1.80,
and the spot rate at the time the pound option was exercised was $1.92. Assume there are
31,250 units in a British pound option contract. What was Abdul's per unit net profit on the
option contract? What was Abdul's total net profit on the option contract? Calculate the
break-even spot rate (at expiration) for Abdul.
ii) Mike sold a put option on British pounds for $.04 per unit. The exercise price was $1.70,
and the spot rate at the time the pound option was exercised was $1.68. Assume there are
50,250 units in a British pound option. What was Mike's per unit net profit on the option?
What was Mike's total net profit on the option? Calculate the break-even spot rate (at
expiration) for Mike.