1. JCrew Inc. (a U.S. based firm) negotiates a conditional currency put options with a bank to hedge its accounts receivable of 2 million euros due on October 31. JCrew Inc. will only exercise its option on the due date. The terms of the conditional currency put options are as follows: K (exercise price) = $1.12 per euro, Trigger = $1.14 per euro, premium = $0.03 per euro, expiration date = October 31. If the spot rate on the due date, i.e., October 31, is $1.13 per euro, what is the amount of U.S. dollar JCrew expects to receive for its 2 million euros?

Question options:

A. $2.26 million

B. $2.24 million

2. Brookshire, Inc. (U.S. based MNC) needs to invest ten million Cambodian riels in its Cambodian subsidiary to support local operations today. Brookshire would like its subsidiary to repay the Cambodian riels in one year. To hedge the exchange rate risk arising from this financing support, Brookshire would engage in a swap transaction involving a forward contract. Thus, in accordance with the swap transaction, Brookshire would

convert the dollars to Cambodian riels in the spot market today and convert Cambodian riels to dollars in one year at today's one-year forward rate.

convert the dollars to Cambodian riels in the spot market today and convert Cambodian riels to dollars in one year at the prevailing spot rate one year later.