Question: Please provide solutions to the following problems. Thanks! e) None of the above 4. An American firm is owed A$1,500,000.00 payable in one year. The

 Please provide solutions to the following problems. Thanks! e) None of

Please provide solutions to the following problems. Thanks!

e) None of the above 4. An American firm is owed A$1,500,000.00 payable in one year. The current spot it $1.2000/A$. An Australian bank is paying 5.00% on deposits or will lend at 7.50%. A U.S. bank is paying 2.00% or will lend at 5.50%. The firm will hedge this exposure with money market hedging. How much will they get in one year? (a) $1,674,418.61 (b) $1,707,906.98 (c) $1,899,000.00 (d) $1,766,511.63 (e) None of the above 5. A firm has a receivable of C$1,000,000.00. They hegdge this exposure with a put option with a strike price of $1.3000/C$. The premium of the option is $0.0130. If at the time of payment the spot price ends up equal to $1.3260/C$, how much did the firm end up with? (a) $1,313,000 (b) $1,287,000 (c) $1,326,000 (d) $1,300,000 (e) None of the above

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!