Final answer:
Kiko Peleh would incur a loss at each spot exchange rate, with the losses decreasing as the spot rate increases. The spot exchange rate has a direct impact on the profitability of the put option.
Step-by-step explanation:
To calculate Kiko Peleh's profit or loss at maturity, we need to determine the intrinsic value of the put option at each spot exchange rate.
Given that the strike price of the put option is $0.008000 = ¥1.00 and the option is for 12,500,000 yen, we can calculate the intrinsic value as follows:
- a) If the spot rate is ¥109 per dollar, the intrinsic value is ($0.008000 - $0.010900) x 12,500,000 = -$275,000. This means Kiko would incur a loss of $275,000.
- b) If the spot rate is ¥116 per dollar, the intrinsic value is ($0.008000 - $0.011600) x 12,500,000 = -$200,000. This means Kiko would incur a loss of $200,000.
- c) If the spot rate is ¥121 per dollar, the intrinsic value is ($0.008000 - $0.012100) x 12,500,000 = -$137,500. This means Kiko would incur a loss of $137,500.
- d) If the spot rate is ¥124 per dollar, the intrinsic value is ($0.008000 - $0.012400) x 12,500,000 = -$125,000. This means Kiko would incur a loss of $125,000.
- e) If the spot rate is ¥130 per dollar, the intrinsic value is ($0.008000 - $0.013000) x 12,500,000 = -$100,000. This means Kiko would incur a loss of $100,000.
- f) If the spot rate is ¥136 per dollar, the intrinsic value is ($0.008000 - $0.013600) x 12,500,000 = -$75,000. This means Kiko would incur a loss of $75,000.
- g) If the spot rate is ¥139 per dollar, the intrinsic value is ($0.008000 - $0.013900) x 12,500,000 = -$50,000. This means Kiko would incur a loss of $50,000.
Therefore, Kiko would incur a loss at each spot exchange rate, with the losses decreasing as the spot rate increases. The spot exchange rate has a direct impact on the profitability of the put option.