Delos borrowed 100 million two years ago. The loan agreement, an amortizing loan, was for 5 years at 2.500% interest per annum.

Call on Rupee

$0.0190/Rp

$0.00046/rp

a.     Should Shelbie buy a put on Indian Rupee or a call on Indian Rupee?

b.     What is Shelbie’s breakeven price on the option purchased in part (a)?

c.      Using your answer from part (a), what is Shelbie’s gross profit and net profit (including premium) if the spot rate at the end of 90 days is indeed $0.0220/Rp?

d.     Using your answer from part (a), what is Shelbie’s gross profit and net profit (including premium) if the spot rate at the end of 90 days is $0.0300/Rp?

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