Sololo Sloes has sold a home to the American First Family in Nairobi Karen area for $12 miliny months. The first family has requested for 3 months credit to compete due diligence and make the payment given: Interest rate USA 12%p.a Kenya 10%p.a Spot rate: $1/Kes. 76.22-92 3 month forward rate: $1/Kes. 64.23-93 There is a 3 month dollar call option at a premium of $25,000 to the exercised at $1/Kes.66.53. There is also a 3 month dollar put option at a discount of $10,000 to be exercised at $1/Kes.65.60 REQUIRED Using suitable computations illustrate three strategies available for Sololo slopes in managing this exposure and advice the suitable strategy.
Sololo Sloes has sold a home to the American First Family in Nairobi Karen area for $12 miliny months. The first family has requested for 3 months credit to compete due diligence and make the payment given: Interest rate USA 12%p.a Kenya 10%p.a Spot rate: $1/Kes. 76.22-92 3 month forward rate: $1/Kes. 64.23-93 There is a 3 month dollar call option at a premium of $25,000 to the exercised at $1/Kes.66.53. There is also a 3 month dollar put option at a discount of $10,000 to be exercised at $1/Kes.65.60 REQUIRED Using suitable computations illustrate three strategies available for Sololo slopes in managing this exposure and advice the suitable strategy.
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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Transcribed Image Text:QUESTION FOUR
Sololo Sloes has sold a home to the American First Family in Nairobi Karen area for $12 milion
menths. The first family has requested for 3 months credit to compete due diligence and
make the payment given:
Interest rate
USA 12%p.a
Kenya 10%p.a
Spot rate: $1/Kes. 76.22-92
3 month forward rate: $1/Kes. 64.23-93
There is a 3 month dollar call option at a premium of $25,000 to the exercised at
SI/ Kes.66.53.
There is also a 3 month dollar put option at a discount of $10,000 to be exercised at
$1 Kes.65.60
REQUIRED
Using suitable computations illustrate three strategies available for Sololo slopes in
managing this exposure and advice as the suitable strategy.
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