Question: You are a U . S . - based importer of bicycles and just bought competition - style bicycles for 1 0 0 , 0

You are a U . S . - based importer of bicycles and just bought competition - style bicycles for 1 0 0 , 0 0 0 from Italy. You owe 1 0 0 , 0 0 0 to the Italian supplier in one year. You are concerned about the amount of dollars you will have to pay for this purchase in one year, Suppose: Spot exchange rate is $ 1 . 5 0 per euro Forward exchange rate is $ 1 . 2 5 per euro U . S . interest rate is 3 . 0 0 % per annum Interest rate in Europe is 4 . 0 0 % per annum Call option w

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