Use the following information for the next 8 questions. UCD (U.S. based MNC) will receive 250,000 euros in one year. The spot exchange rate today is $1.20 per euro. It observes that 1. The one-year interest rate for euros is 8%, and the one-year interest rate for U.S. dollars is 3%. 2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.18 per euro, and a premium of $0.02 per euro. 3. In the forward market, the one-year forward rate exhibits a 5% discount from the current spot exchange rate. 2.If UCD decides to use money market hedging strategy to hedge its receivables, how shall UCD implement the strategy
Use the following information for the next 8 questions.
UCD (U.S. based MNC) will receive 250,000 euros in one year. The spot exchange rate today is $1.20 per euro. It observes that
1. The one-year interest rate for euros is 8%, and the one-year interest rate for U.S. dollars is 3%.
2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.18 per euro, and a premium of $0.02 per euro.
3. In the forward market, the one-year forward rate exhibits a 5% discount from the current spot exchange rate.
2.If UCD decides to use
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