B C D E F 17 18 Cash outflows - 1 Month from Now 19 Unhedged Forward Hedge Option Hedge Money Market Hedge 20 Spot rate in 1 month Strike Price Cash Flow Cash Flow Exercise Decision Cash Flow Cash Flow 21 0.25 0.34 (250,000) | $ 340,000) NO 22 0.26 0.34 (260,000) S (340,000)| NO 23 0.27 0.34 (270,000) S 340,000) NO 24 0.28 0.34 (280,000) S (340,000) NO 25 0.29 0.34 (290,000) S (340,000) NO 26 0.3 0.34 (300,000) S (340,000) | NO 27 0.31 0.34 (310,000) S (340,000) NO 2B 0.32 0.34 (320,000) S (340,000) NO 29 0.33 0.34 (330,000) (340,000) NO 30 0.34 0.34 (340,000) $ (340,000) NO 31 0.35 0.34 (350,000) S (340,000) YES 32 0.36 0.34 (360,000) S (340,000) YES 33 0.37 0.34 (370,000) S (340,000) YES 34 0.38 0.34 (380,000) S (340,000) YES 35 0.39 0.34 (390,000) S (340,000) YES 36 0.4 0.34 (400,000) S (340,000) YES 37 0.41 0.34 (410,000) S (340,000)| YES 3.B 0.42 0.34 (420,000) (340,000) YES 39 0.43 0.34 (430,000) (340,000) YES 40C D E H K N 0 P R w Accounts Payable of TRL1,000,000 Break-even spot rate between Option Hedge and Money Market Hedge - You don't have to show your calculation, just look at the graph and decide A/P Amount $1,000,000.00 Which alternative is better if Spot > BE? Option Information CALL or PUT? Premium (today) FV of Premium in 1 month Break-even spot rate between Money Market and Forward Hedges - Just Explain your answer Strike Price S 0.34 per TRL $4,000.00 Premium 1.25% of the current spot rate for one foreign currency. Money Market Information US Turkey INVEST or BORROW TRL? Investing (Lending) Rate 2.0% 7.5% How much to invest/borrow in TRL? Borrowing Rate 3.0% 8.0% How much it worths in dollars today? FV of borrowing or investing Exchange Rate Information 1-month Forward Rate 0.3400 per TRL Current Spot Rate 0.3200 per TRL BUY or SELL TRL Forward