b. Determine the option types that you will consider based on the exchange rate quotes provided by

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b. Determine the option types that you will consider based on the exchange rate quotes provided by your bank. Remember we will long or short the base currencies (in this case study the currencies that are not $) and the FV of premium cost is based on the borrowing cost of $ for the time period of the option. For example if it is a 3 month option, then the interest rate that should be applied is United States 3 month borrowing rate of 2.687%/4 = 0.67175%). Calculate the total cost of using options as hedging instrument for the import from Australia (Complete Table 4 on the separate answer sheet)

Posted Date: Sep 28, 2021 12:28 AM

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b. Determine the option types that you will consider based on the exchange rate quotes provided by

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Expert Answer:

TABLE 4 1 Type of Option Call Option 2 Total Cost of Premium including opprotunity cost p... View the full answer

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