answer the example 63 each question separate

l l llOlWng number of firms, however, are actively hedging not only backlog expo- sures, but also selectively hedging quotation and anticipated exposures -Anticipated exposures are transactions for which there are no contracts or ments between parties. VII.3.4.3 Which contractual hedges Transaction exposure management programs are divided along an "option or no-option Firms that do not use currency options rely almost exclusively on forward con- e Many firms have established rigid transaction exposure risk management policies that These contracts generally require the use of forward contract hedges on a percent- - The remaining portion of the exposure is selectively hedged on the basis of the Example 63 Trident CFO, Maria Gonzalez, has just complete a purchase of communication 1. How much in U.S. dollars will Trident pay in 3 months without a hedge if the expected line tracts and money market hedges. mandate proportional hedging age of existing transaction exposures. firm's risk tolerance, view of exchange rate movements, and confidence level. equipment from a British firm for 1 million due in three months. spot rate in 3 months is assumed to be $1.80/? 2. Suppose that: 89 Three-month forward rate is $1.7540/ How much in U.S. dollars will Trident pay in 3 months with a forward market hedge How much in U.S. dollars will Trident pay in 3 months with a money market hedge? 3. Suppose that: . The spot rate is $1.7640/ UK thre-month borrowing rate is 10.0% (2.5% per quarter) US three-month investing interest rate is 6,0% (1.5% per quarter) How does Trident hedges the exchange rate risk of the 1 million payable on the money market? 4. The value of Trident's 1,000,000 account payable depends on a range of possible ending spot exchange rates . Three-month call and put option for 1 million with strike price $1.75/ is 1.5% premum Trident's cost of capital is 12% (3% per quarter) How much in U.S. dollars will Trident pay in 3 months with an option hedge if the expected spot rate in 3 months is assumed to be more than $1.75/? To be $1.80/? 90