Question: 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.

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

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 Amount (to be paid in DKK) DKK3,000,000 Days 60 DKK5.7200/$ DKK is sold at Premium of 2% Spot Forward premium or discount (calculate) Expected change in FX rate (calculate) Identify what kind of Option should be used DKK is sold at Premium of 1.50% Premium - CALL Option 1% 2% Premium - PUT Option CALL Strike Price DKK5.7500/$ DKK5.7500/$ PUT Strike Price Identify which rate should be used US borrowing AND investing Danish borrowing AND investing Cost of Capital (WACC) 5% and 3% respectivelly 6% and 4% respectivelly 10% Question 5 1 pts 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)

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