Question 1 Assume that currency futures are available for trade in Trinidad & Tobago. You are at the helm of financial affairs of T&T Petrochem Ltd. and your company exports its goods to Japan. What is the type of risk inherent in exporting goods to Japan? If you want to hedge this risk using Yen Futures, would you buy or sell them? Why? In answering this question, assume that the exchange rate quoted on Futures is in terms of TT$/Yen.Question 2 Let us say that a put and a call have the same maturity date and strike price. If both options have the same price, what will be the value of the stock?
Question 1 Assume that currency futures are available for trade in Trinidad & Tobago. You are at the helm of financial affairs of T&T Petrochem Ltd. and your company exports its goods to Japan. What is the type of risk inherent in exporting goods to Japan? If you want to hedge this risk using Yen Futures, would you buy or sell them? Why? In answering this question, assume that the exchange rate quoted on Futures is in terms of TT$/Yen.Question 2 Let us say that a put and a call have the same maturity date and strike price. If both options have the same price, what will be the value of the stock?
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Question 1
Assume that currency futures are available for trade in Trinidad & Tobago. You are at the helm of financial affairs of T&T Petrochem Ltd. and your company exports its goods to Japan. What is the type of risk inherent in exporting goods to Japan? If you want to hedge this risk using Yen Futures, would you buy or sell them? Why? In answering this question, assume that the exchange rate quoted on Futures is in terms of TT$/Yen.
Question 2
Let us say that a put and a call have the same maturity date and strike price. If both options have the same price, what will be the value of the stock?
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