A U.S. company has British pound 2 million payables in 90 days. The company decide to use option contracts to manage its FX risk from this international transaction and has the following information about the option contracts. A 90 day call option contract for BP 2 million with strike rate = $1.74/BP, call premium per British pound is $0.02 A 90 day put option contract for BP 2 million with strike rate = $1.75/BP, put premium per British pound is $0.02 Calculate US$ cost or US$ net revenue of the US company at the expiration date of the option based on the decision O $3.54 million O $3.56 million $3.48 million O $3.52 million

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An Australian company imports goods from Germany and expects the payment of EUR 250,000 after 60 days. Therefore, the company purchased a Call option with a strike price of AUD 1.25/EUR and a premium of 5% of the option value. At the maturity of the option, the market price is AUD/EUR=0.85. Specify the decision of the Australian company. O a. To not hedge the risk O b. To purchase the amount in EUR from the market O c To exercise the option O d. To search for another option contract

UCD (U.S. based MNC) will receive 250,000 euros in one year. The spot exchange rate today is $1.20 per euro. It observes that1. The one-year interest rate for euros is 8%, and the one-year interest rate for U.S. dollars is 3%.2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.18 per euro, and a premium of $0.02 per euro.3. In the forward market, the one-year forward rate exhibits a 5% discount from the current spot exchange rate. How should UCD utilize the forward market to hedge the exchange rate risk for its future receivables? And what shall be the amount received based on this hedging strategy? (Note: UCD can only buy or sell the forward contract at the forward rate available in the forward market described in bullet 3.)

Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months. What is the expected value of payables in AUD under hedge?

Yoyo, a german company expects to pay US$10 million to a supplier in US. It is now December and the payment is due in March. The current spot rate is 1.2100. The company wants to use currency options to hedge the exposure. March currency put options are available and are for 125,000 euros, have a strike price of $1.2200 and the tick size is $0.0001. The cost of the option contract is 2.75 US cents per euro.Assuming that there is no basis,(i) Devise a hedging strategy for Yoyo using currency options.(ii) Advise on the action to be taken by Yoyo and the outcome in case the spot rate in March when the dollars must be paid is:(a) $1.2500 = €1 (b) $1.1800 = €1

A Canadian supplier is offering two options to his American client to pay for an equipment: paying 13,000 Canadian dollars now or paying 10,000 US dollars in 6 months. If the annual interest rate for the Canadian dollar is 5% and for the US dollar is 8%, what is the "implied" exchange rate? Question 5 options:   CAD0.7581/USD.   CAD1.3520/USD.   CAD0.7505/USD.   CAD1.3190/USD.   CAD1.3325/USD.   CAD0.7396/USD.

The current spot exchange rate is 1.27 $/ BP. Your customer is an importer from Britain. He will have to pay 10 million BP in three months. The following currency options (prices are in Dollars for BP delivery) are available: Which option will you recommend for hedging the BP liability (Put or Call)? Explain the customer the difference between the two strikes by comparing them to an unhedged position. In your explanation use as an example exchange rates of 1.35$/BP and 1.24$/BP in three months. Show (calculate) the payable total cost under the two exchange scenarios and three hedging choices (1: unhedged, 2: 1.25 strike hedge and 3: 1.30 hedge); you can disregard the time value of money of the premium payment.

A U.S. firm holds an asset in France and faces the following scenario: State 1 25% Probability Spot rate. P* P State 2 25% a Exposure b. Variance C. Variance State 3 258 $ 2.20 per euro € 1,500 $ 2,200 In the above table, P is the euro price of the asset held by the U.S. firm and Pis the dollar price of the asset. Required: a. Compute the exchange exposure faced by the U.S. firm. b. What is the variance of the dollar price of this asset if the U.S. firm remains unhedged against this exposure? c. If the U.S. firm hedges against this exposure using a forward contract, what is the variance of the dollar value of the hedged position? $ 2.10 per euro € 1,400 $ 1,940 State 4 25% $ 2.00 per euro € 1,300 $ 1,500 $ 1.90 per euro € 1,200. $ 1,280

The current spot rate of Singapore dollar (SGD) is 0.50 USD/SGD. You bought a six-month European put option on SGD which has strike price of 0.55 USD/SGD and a premium 0.01 USD/SGD. Each put option contract trades 1,000,000 Singapore Dollars. Calculate your gain/loss in the put option contract if the market exchange rate turns out to be 0.52 USD/SGD on the contract maturity date.     A. 20,000 USD gain.     B. 10,000 USD loss.     C. 40,000 USD gain.     D. 10,000 USD gain.