You source Ice Cubes to sell in the US from an Eskimo village and you owe them DKK 3,000,000 which is due in 60 days. Greenland is part of Denmark and uses Danish Krona (DKK) as its currency. If the Currency exchange rates and interest rates are a as follows what is your hedging decision? Data Table DKK3,000,000 Amount (to be paid in DKK) Days Spot 60 Forward premium or discount (calculate) DKK5.7200/$ DKK is sold at Premium of 2% DKK is sold at Premium of 1.50% Expected change in FX rate (calculate) Identify what kind of Option should be used Premium - CALL Option Premium - PUT Option 1% 2% CALL Strike Price DKK5.7500/$ DKK5.7500/$ PUT Strike Price Identify which rate should be used US borrowing AND investing 5% and 3% respectively 6% and 4% respectively Danish borrowing AND investing ca 15 A J altv e Question 1 Remain Unhedged (1) Compute the expected FX rate of DKK/$ in 60 days. I 5.7057 Question 2 Remain Unhedged (2) How much will you have to pay in USD, if you choose to Remain Unhedged. 534,902.38 Question 3 APR 15 5 4 Question 3 Forward hedge (1) Compute the 60-day forward FX rate of DKK/$. (Round your answer to 4 decimals). Question 4 Forward hedge (2) Find how much you will have to pay in 60 days if you choose to hedge in the forward marke (Round your answer to 2 decimals). Question 5 1 pts Question 5 Money market hedge (1) Find the amount you need to invest today in DKK Question 6 1 pts Money market hedge (2) How much USD will you need to spend today to buy DKK for the investment (Hint: translate the DKK from previous question to USD). Question 7 1 pts Money market hedge (3) Adjust the amount in USD from the previous questions for the Time Value of Money (Hint: find the future value in 60 days of the amount from the previous question). Question 8 1 pts Option hedge (1) What option should you buy? Call . Put 1 pts Question 11 Option hedge (4) If you exercise the option at a strike price, how much will you have to pay in USD for the needed amount of DKK? 521,739.13 Question 12 1 pts Option hedge (5) Find the total cost of the Payables if you hedge on the option market? (Hint: compute total cost including the FV of the option premium) 532.403.47 You source Ice Cubes to sell in the US from an Eskimo village and you owe them DKK 3,000,000 which is due in 60 days. Greenland is part of Denmark and uses Danish Krona (DKK) as its currency. If the Currency exchange rates and interest rates are a as follows what is your hedging decision? Data Table DKK3,000,000 Amount (to be paid in DKK) Days Spot 60 Forward premium or discount (calculate) DKK5.7200/$ DKK is sold at Premium of 2% DKK is sold at Premium of 1.50% Expected change in FX rate (calculate) Identify what kind of Option should be used Premium - CALL Option Premium - PUT Option 1% 2% CALL Strike Price DKK5.7500/$ DKK5.7500/$ PUT Strike Price Identify which rate should be used US borrowing AND investing 5% and 3% respectively 6% and 4% respectively Danish borrowing AND investing ca 15 A J altv e Question 1 Remain Unhedged (1) Compute the expected FX rate of DKK/$ in 60 days. I 5.7057 Question 2 Remain Unhedged (2) How much will you have to pay in USD, if you choose to Remain Unhedged. 534,902.38 Question 3 APR 15 5 4 Question 3 Forward hedge (1) Compute the 60-day forward FX rate of DKK/$. (Round your answer to 4 decimals). Question 4 Forward hedge (2) Find how much you will have to pay in 60 days if you choose to hedge in the forward marke (Round your answer to 2 decimals). Question 5 1 pts Question 5 Money market hedge (1) Find the amount you need to invest today in DKK Question 6 1 pts Money market hedge (2) How much USD will you need to spend today to buy DKK for the investment (Hint: translate the DKK from previous question to USD). Question 7 1 pts Money market hedge (3) Adjust the amount in USD from the previous questions for the Time Value of Money (Hint: find the future value in 60 days of the amount from the previous question). Question 8 1 pts Option hedge (1) What option should you buy? Call . Put 1 pts Question 11 Option hedge (4) If you exercise the option at a strike price, how much will you have to pay in USD for the needed amount of DKK? 521,739.13 Question 12 1 pts Option hedge (5) Find the total cost of the Payables if you hedge on the option market? (Hint: compute total cost including the FV of the option premium) 532.403.47