(Transaction Exposure) Trident - A U.S.-based company, has concluded a sale of telecommunications equipment to Regency (U.K.). A total payment of 2,000,000 is due in 90 days. The following table shows relevant exchange rates and interest rates. To hedge, * / in 90 days. (Keep four decimal numbers/) the company is considering using 2,000,000 put options with the strike of $1.55/. Comparing against the forward hedge, the break-even spot rate for such options hedge is $ 3.0842 Assumptions 90-day A/R in pounds Spot rate, US$ per pound ($/) 90-day forward rate, US$ per pound ($/) 3-month U.S. dollar investment rate 3-month U.S. dollar borrowing rate 3-month UK investment interest rate 3-month UK borrowing interest rate Put options on the British pound: Strike rates, US$/pound (S/) Strike rate ($/) Put option premium Strike rate ($/) Put option premium Strike rate ($/) Call option premium Trident's WACC Expected spot rate in 90 days, US$ per pound ($/) Value 2,000,000.00 $1.5610 $1.5620 3% 6% 9% 14% $1.55 6.6% $1.54 8.4% $1.55 9.3% 6.000% $1.5431 (Transaction Exposure) Trident - A U.S.-based company, has concluded a sale of telecommunications equipment to Regency (U.K.). A total payment of 2,000,000 is due in 90 days. The following table shows relevant exchange rates and interest rates. To hedge, * / in 90 days. (Keep four decimal numbers/) the company is considering using 2,000,000 put options with the strike of $1.55/. Comparing against the forward hedge, the break-even spot rate for such options hedge is $ 3.0842 Assumptions 90-day A/R in pounds Spot rate, US$ per pound ($/) 90-day forward rate, US$ per pound ($/) 3-month U.S. dollar investment rate 3-month U.S. dollar borrowing rate 3-month UK investment interest rate 3-month UK borrowing interest rate Put options on the British pound: Strike rates, US$/pound (S/) Strike rate ($/) Put option premium Strike rate ($/) Put option premium Strike rate ($/) Call option premium Trident's WACC Expected spot rate in 90 days, US$ per pound ($/) Value 2,000,000.00 $1.5610 $1.5620 3% 6% 9% 14% $1.55 6.6% $1.54 8.4% $1.55 9.3% 6.000% $1.5431