Frongoch co

Hi Sir,

I’m really confused with this question.

So first the question hasn’t given a exercise price to calculate option? Don’t understand where the 1.1540 comes from?

Also with Qb) I agree the difference in the rate is 0.18 so 18 points which the predicted rate will be 1.1542 However in scenario 1 as per my understanding is it not:

Spot August at 1.1534
Sep futures at 1.1552
Difference being 0.0018 again but 2 months difference so 0.0018/2*1= 0.0009
So would the predicted rate not be 1.1552-0.0009== 1.1543

I don’t how they are getting 18 basis point on both and the rate as 1.1542 in scenario 1?

Thank youuuu