The current exchange rate is W (Korean Won)950 per $1. Ewha corp. is a Korean exporting...

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The current exchange rate is W (Korean Won)950 per $1. Ewha corp. is a Korean exporting company and is scheduled to receive US dollars in a year. It considers a contract with Zi bank to hedge the foreign exchange risk. Let S denote W per $1 in a year. In the contract, if 900 (= S (= 950, Ewha can sell the hedged amount of dollars for W950 per $1 to the bank. However, if S=> 1000, Ewha has to sell twice as much as the hedged amount for W950 per $1. For the other values for S, the contract is not effective. 'x <= y' means that y is greater than or equal to x (or x is less than or equal to y). (Hint: we can think of 16 different barrier option positions: (up or down)x(in or out)x(call or put)x(long or short positions) = 2x2x2x2=16). (8) How can Zi bank make this contract and what is the condition that makes the initial cost zero? (10) Draw the final profit in W from the contract for Ewha if the hedged amount is $1. (2) If the price of $1 is W1030 at maturity, what is Ewha's profit? The current exchange rate is W (Korean Won)950 per $1. Ewha corp. is a Korean exporting company and is scheduled to receive US dollars in a year. It considers a contract with Zi bank to hedge the foreign exchange risk. Let S denote W per $1 in a year. In the contract, if 900 (= S (= 950, Ewha can sell the hedged amount of dollars for W950 per $1 to the bank. However, if S=> 1000, Ewha has to sell twice as much as the hedged amount for W950 per $1. For the other values for S, the contract is not effective. 'x <= y' means that y is greater than or equal to x (or x is less than or equal to y). (Hint: we can think of 16 different barrier option positions: (up or down)x(in or out)x(call or put)x(long or short positions) = 2x2x2x2=16). (8) How can Zi bank make this contract and what is the condition that makes the initial cost zero? (10) Draw the final profit in W from the contract for Ewha if the hedged amount is $1. (2) If the price of $1 is W1030 at maturity, what is Ewha's profit?