Comments on Problem Set #2

Here are a few comments based on inquiries from a few students.

#2. This table doesn't use the term "settle". Use "latest" rather than settle.

#3. The strike price of $1.22 is listed as 12200. The premiums (or unit costs) are in terms of "cents per unit". So for a June call with a strike price of $1.20, find the strike price of 12000. It says 3.28. That means it is 3.28 cents per unit of currency (euro). That is $0.0328 per euro.

#5. It is simple enough to use the relative purchasing power parity. You can report the percentage change in the appreciation/depreciation. Since you know the initial exchange rate ($0.50), you can calculate what the exchange rate would be after adjustment.