exchange rate Put option Exercise? Inflow Outflow Put premium Exercise cost Profit 1,625 1,64 1,6513 1,6612 1,701

Q: What is the required annual rate of return on the cocoa contract ? You plan to hold the contract for…

A: Solution:- Given in Question- Risk Free Return = 4% Risk Premium = 6% Beta = -0.291 A. To Calculate…

Q: A speculator is considering the purchase of a 6-month Swiss franc call option on 50,000 francs with…

A: Currency = 50,000 FrancsStrike price = $1.0885/SFrPremium = $0.0075/SFrSpot price =…

Q: The current spot exchange rate equals DDD1 = $3.4567. The risk-free rate in DreamLand is 3%, and it…

A: To evaluate the investment project in DreamLand, we need to calculate the net present value (NPV)…

Q: . What is the value of the put option? (

A:

Q: Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter's…

A: Here,RequiredPlatinum is 10,000 ouncesFuture Contract Rate is $1,290 per ouncesTime Period of Future…

Q: The spot price for smoked salmon is $5,000 per ton and its six-month futures price is $4,800. The…

A:

Q: MNC needs 100,000 Canadian dollars (C$) in 90 days (i.e. has payable due) and is trying to determine…

A: Forward rate = $0.60 If Actual spot rate is less than forward rate i.e. $0.60, then the forward…

Q: a. The CHF/ZAR cross-currency rate Omni would use in valuing the Swiss equity portfolio. Note: Round…

A: The relative worth of two currencies, or the amount of one currency that may be exchanged for one…

Q: The British pound (£) is currently worth 1.45 euros (€). This can either increase by u = 1.1 or…

A: The Binomial Tree option pricing model is used to find out the value of options on an underlying…

Q: equivalent amount of equities denominated in South African rands (ZAR). Omni will realize net…

A: ParticularsZAR/USDZAR/USDCHF/USDCHF/USDMaturityBidAskBidAskSpot6.26936.28011.52941.536130-days6.2550…

Q: In a MNC has peso payables coming due in 90 days, and is certain the the peso will appreciate.…

A: Put option contracts are the contracts which gives the buyer the right to sell an underlying asset.…

Q: Kansas Corporation, an American company, has a payment of €5.9 million due to Tuscany Corporation…

A: Scenario 1: Spot Rate = 0.85 €/SStrategy 1: Forward ContractCost of €5.9 million at forward rate:…

Q: To find the quoted price of a 180-day T-bill with a 5% yield and the contract price for a $1,000,000…

A: Treasury bills are short term debt securities issued by U.S. Department of the treasury serves as an…

Q: Suppose the risk free rate in pounds (£) is 5.71% and the risk free rate in US dollars ($) is 7.95%.…

A: The covered interest rate parity ensures the determination of future exchange rates without…

Q: Suppose that after graduation, you take a job with an Oklahoma oil company. Yo boss indicates that…

A: For hedging, if we go long that means we have got the right to buy the underlying asset at…

Q: Assume the following information: You have $1,000,000 to invest Current spot rate of pound =…

A:

Q: A put option is written on €100 with a strike price of $1.00 = €1.00. In one period, there are two…

A: gain on call option if price is $1.15 = €1.00 is 0.15.gain on call option if price is $0.85 = €1.00…

Q: As a US exporter selling to Europe. You wish to hedge a 1,040,000 Euro to be received in 3 months…

A: Calculation of dollars received if U.S. exporter hedge the position with futures or if Exporter…

Q: You want to invest in a riskless project in Sweden. The project has an initial cost of SKr2.1…

A: Step 1: to calculate the risk-free rate in Sweden using the international Fisher effect:  (1 + iUS)…

Q: Your wage increased from $14 before COVID to $18 after COVID. This increase happened over 2 year.…

A: Present Value = pv = $14Future Value = fv = $18Time = t = 2 Years

Q: futures price is $820 per ounce. How many contracts do you need to purchase? How much will you pay…

A: Given that,To find the different entities using the given information.

Q: If you deposit $700 in a bank account that earns 5 percent per year, how much total interest will…

A: Interest Amount = Principal * ( 1 + r )n - Principal

Q: Your company needs £500,000 per month. You choose to hedge half of the required amount by entering…

A: Futures are standardized contracts. They are used to buy or sell underlying asset at the…

Instruments of Foreign Exchange Market

Foreign exchange is a worldwide market in which one nation’s currency is converted into another nation’s currency. In further terms, exchanging of nations currency with foreign currencies. Foreign exchange happens at a specified rate which is termed the foreign exchange rate. The exchange rates are not constant continuously changing as they are derived by market forces of supply and demand. Widely used foreign currencies are the United States- dollar, Euro, Japanese Yen, British pound, and Australian dollar. US- dollar is the most denominated foreign currency. The Euro to US dollar is a widely used currency pair in the forex market as these two currencies represent the world’s enormous economy. Forex trade is simple as exchanging currencies at the bank. The main players of forex markets are the central banks, financial institutions, intermediaries, investments banks, and other banks. Central Bank is the supreme player who decides the currency value of their own nation on the forex market. Mostly foreign exchange-traded at FX market (forex market) when tourists’ visits a foreign country, import, and export happens between two countries.