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 Spot Forward premium or discount (calculate) 60 DKK5.7200/$ DKK is sold at Premium of 2% DKK is sold at Premium of 1.50% Expected change in FX rate (calculate) 1% 2% Identify what kind of Option should be used Premium - CALL Option Premium - PUT Option CALL Strike Price PUT Strike Price Identify which rate should be used DKK5.7500/$ DKK5.7500/$ US borrowing AND investing Danish borrowing AND investing 5% and 3% respectively 6% and 4% respectively 10% Cost of Capital (WACC) Question 9 1 pts Option hedge (2) Calculate the cost of the option (premium) in USD. Question 10 1 pts Option hedge (3) Adjust the option cost for the Time Value of Money (Hint: find future value in 60 days of the option premium from the previous question)

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