A US firm owes 2,193,797 euros to a French firm in 6 months. The current spot...
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A US firm owes 2,193,797 euros to a French firm in 6 months. The current spot rate is USD1.04 = 1 EUR. The US firm is considering hedging the entire contract with an options hedge. A call option on the euro with a strike price of $1.43/EUR is available for a premium of $0.016 per euro. A put option on the euro with a strike price of $1.12/EUR is available for a premium of $0.059 per euro. Suppose that the American firm purchases the option. Suppose further that the spot price on the EUR is $1.47/EUR on the date that they must pay the French firm. What is the dollar cost to the American firm of the imports? Do not include the option premium in your answer. 87.752 A US firm owes 2,193,797 euros to a French firm in 6 months. The current spot rate is USD1.04 = 1 EUR. The US firm is considering hedging the entire contract with an options hedge. A call option on the euro with a strike price of $1.43/EUR is available for a premium of $0.016 per euro. A put option on the euro with a strike price of $1.12/EUR is available for a premium of $0.059 per euro. Suppose that the American firm purchases the option. Suppose further that the spot price on the EUR is $1.47/EUR on the date that they must pay the French firm. What is the dollar cost to the American firm of the imports? Do not include the option premium in your answer. 87.752
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The amount owed by the American firm is 2193797 euros To calculate the dollar c... View the full answer
Related Book For
Financial Institutions Management A Risk Management Approach
ISBN: 978-0071051590
8th edition
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
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