K-Roo Ltd., an Australian firm, has a USD 264 million payable in one year that it wants to hedge, and enters into a risk sharing arrangement with its supplier, Ala Co. The terms of the risk sharing contract are the following: Base rate: AUD1.13/USD Neutral zone: AUD1.017/USD to AUD1.243/USD. K-Roo and Ala Co. agree to split the exchange rate risk equally. If the spot exchange rate in one year is AUD1.4125/USD, how much must K-Roo pay? a. 320.6940 million b. 336.7287 million c. 288.6246 million d. 22.3740 million O e. 372.9000 million

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.