QUESTION 5 A US bank is entering into a one year forward contract with a corporate customer where the bank will sell 2M Pounds for 2.64M USD to the corporate client. The riskless rate is 3% in both US and UK (assume annual compounding). How can the bank hedge? (1.5 marks) OA. Sell $ 2.56M today. OB. Sell 1.94M pound today. OC. Buy $ 2.56M today. OD. Buy 1.94M pounds today.
QUESTION 5 A US bank is entering into a one year forward contract with a corporate customer where the bank will sell 2M Pounds for 2.64M USD to the corporate client. The riskless rate is 3% in both US and UK (assume annual compounding). How can the bank hedge? (1.5 marks) OA. Sell $ 2.56M today. OB. Sell 1.94M pound today. OC. Buy $ 2.56M today. OD. Buy 1.94M pounds today.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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V5
Transcribed Image Text:QUESTION 4
Conditional Stress Testing involves:
O A. Scenarios are generated using a few core variables, and peripheral variables are ignored.
OB. Scenarios are generated using a few core variables, and peripheral variables are included in the scenario generation. The peripheral variables'
relationship with the core variables is determined using regression analysis.
OC. Scenarios are generated using a few core variables, and peripheral variables are included in the scenario generation. The peripheral variables' are
included using subjective estimates.
O D. Scenarios are generated using a few core variables, and peripheral variables are included in the scenario generation. The peripheral variables' are
included for days when there is a significant movement.
W
QUESTION 5
A US bank is entering into a one year forward contract with a corporate customer where the bank will sell 2M Pounds for 2.64M USD to the corporate client.
The riskless rate is 3% in both US and UK (assume annual compounding). How can the bank hedge? (1.5 marks)
OA. Sell $2.56M today.
OB. Sell 1.94M pound today.
OC. Buy $2.56M today.
OD. Buy 1.94M pounds today.
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