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Please tell is below workings for option is correct or not
Options
Exercise price 1.62
Forward price 1.5996Exercise option yes
Gain in basis 0.0204
Total gain 1,919,940
Premium -32,187
Amount to be paid -1,500,000Net outcome 387,753
We do not know what the spot rate will be on the date that the option is exercised (and we certainly cannot assume that it will be equal to the current forward rate).
Therefore we can only do what the examiner has done in his answer and show the worst outcome for each of the exercise prices.
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