Consider an Option to Buy £10,000 for €12,500 If the Call Finishes Out-Of-The-Money What Is Your Replicating Portfolio

question 84

Essay

Consider an option to buy £10,000 for €12,500.In the next period,if the pound appreciates against the dollar by 37.5 percent then the euro will appreciate against the dollar by ten percent.On the other hand,the euro could depreciate against the pound by 20 percent.
Big hint: don't round,keep exchange rates out to at least 4 decimal places.

$\begin{array}{lll}spot Rates&&Risk-tree Rates\\S_{0}(\$ / €) & \$ 1.60=€ 1.00&i \$ 3.00 \% \\S_{0}\left(\$ / £)\right. & \$ 2.00=£ 1.00&i €4.00 \% \\S_{0}\left(€ /£)\right. & € 1.25=£ 1.00&i £4.00 \%\end{array}$ If the call finishes out-of-the-money what is your replicating portfolio cash flow?

Understand the concept and importance of continuous practice in entrepreneurial skills development.

Identify various types of entrepreneurship and the significance of family enterprises.

Recognize the broad impact of entrepreneurs on society.

Define entrepreneurship and appreciate its multifaceted nature.

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Definitions:

Shampoo

A hair care product designed to clean the scalp and hair, removing dirt, oil, and other impurities.

Viable Opportunity

An opportunity that has a realistic chance of success, offering potential for profit or benefit.

Generate Value

The process of creating or enhancing products, services, or technologies that customers or clients find worthwhile and are willing to pay for.

Generating Value

The process of creating benefits or value for stakeholders through the provision of products, services, or information.