Question: 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

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

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

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