Chapter 11 Assignment Suppose that Goodwin Co, a U.S. based MNC, knows that it will receive 100,000 pounds in one year. It is considering a currency put option to hedge this receivable. Currency put options on the pound with expiration dates in one year currently have an exercise price of $1.20 and a premium of $0.02. Goodwin Co. wishes to use its own forecast of what the spot rate might be for the pound one year from now $1.17, with 30.00% probability $1.22, with 60.00% probability $1.25, with 10.00% probability For each scenario in the following table, fill in the dollar amount received per unit for the put options (5th column), the total dollar amount received for 100,000 pounds when using the put options (6th column), and whether Goodwin would exercise the options (7th column) Scenario 1 2 3 Pound Spot Rate in 1 Year $1.17 $1.22 $1.25 Option Premium $0.02 $0.02 10.02 Amount Received Per Unit of Put Options $1.20 $1.22 $1.25 Total Cost of Owning Options, With Premium $ Dollar Amount Paid for 100,000 Pounds when Owning Put Options Exercise Options? Yes

Q: Define special purpose entity (SPE)

A: A special purpose entity is a legally separate enterprise that bears liability to an organization.…

Q: OCF analysis

A: Operating Cashflow Analysis  = Net Income + Depreciation and Amortization- Net Working capital

Q: Define corporation

A: Corporation is a legal entity separate from its shareholders. Just like an individual, a corporation…

Q: Define declaration date

A: Answer: Declaration data is nothing a date the dividends are declared. This is usually done first…

Q: Definition of Marco

A: Macroeconomics is the study of how the economy behaves in broad outline. It is largely concerned…

Q: Ifrs solution

A: According to the question given, we need to prepare the journal entries, and, the impairment…

Q: Explanation 1031 like-kind exchange

A:

Q: How to calculate Specification identification

A: Inventory is considered as the items that kept in a business for production or sale or production.…

Q: Define customers

A: Inventory: It can be defined as all the goods, items, materials, and merchandise that are held by a…

Q: Define trademarks.

A:

Q: Define copyright

A: Definition:   Intangible assets: These are the long-term assets that are not physical in nature, but…

Q: Define charter

A: Introduction: Charters are legalized documents that lawfully set up corporate companies. Only…

Q: Define collection policy

A: Introduction: A mutual responsibility between the operating departments, accounts receivables is to…

Q: Define S corporation

A: The S corporation is a tax election that legal business entities can choose to elect for taxes…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.