UCD (U.S. based MNC) will receive 250,000 euros in one year. The spot exchange rate today...

 

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UCD (U.S. based MNC) will receive 250,000 euros in one year. The spot exchange rate today is $1.20 per euro. It observes that 1. The one-year interest rate for euros is 8%, and the one-year interest rate for U.S. dollars is 3%. 2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.18 per euro, and a premium of $0.02 per euro. 3. In the forward market, the one-year forward rate exhibits a 5% discount from the current spot exchange rate. What are the expected U.S. dollars UCD ends up receiving for its 250,000 euro receivable based on its exchange rate forecasting given below? Spot Exchange Rate One Year Later Probability 15% Scenario $1.14 2 $1.17 60% 3 $1.20 25% UCD (U.S. based MNC) will receive 250,000 euros in one year. The spot exchange rate today is $1.20 per euro. It observes that 1. The one-year interest rate for euros is 8%, and the one-year interest rate for U.S. dollars is 3%. 2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.18 per euro, and a premium of $0.02 per euro. 3. In the forward market, the one-year forward rate exhibits a 5% discount from the current spot exchange rate. What are the expected U.S. dollars UCD ends up receiving for its 250,000 euro receivable based on its exchange rate forecasting given below? Spot Exchange Rate One Year Later Probability 15% Scenario $1.14 2 $1.17 60% 3 $1.20 25%

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1Money Market Hedge Step 1 Borrow Euros 8 paequals to the present value of export bill 250000 ... View the full answer