1. (Ch. 11) Forward versus Money Market Hedge on Receivables. Assume the following information: 90-day U.S. interest rate = 1.0% 90-day Euro interest rate = 2.0% F. 90-day(EURUSD) = 1.0850 S.(EURUSD) = 1.0900 Assume that Sam Corp. from the United States will receive EUR 5,000,000 in 90 days. Would it be better off using a forward hedge or a money market hedge? (3 points) Substantiate your answer with estimated revenue for each type of hedge-- Forward hedge (7 points) and Money market hedge (10 points). 2. (Ch. 11) Hedging With Put Options. As treasurer of Killam Corp. (a U.S. exporter to New Zealand), you must decide how to hedge (if at all) future receivables of NZD 3,000,000 (NZD = New Zealand dollar) 90 days from now. Put options are available for a premium of USD.03 per unit and an exercise price of .42 NZDUSD. The forecasted NZDUSD spot rate in 90 days follows: Future Spot Rate (NZDUSD) Probability .44 40% 50 .38 10 Given that you hedge your position with options, create a probability distribution for USD to be received in 90 days. (15 points) .40 1. (Ch. 11) Forward versus Money Market Hedge on Receivables. Assume the following information: 90-day U.S. interest rate = 1.0% 90-day Euro interest rate = 2.0% F. 90-day(EURUSD) = 1.0850 S.(EURUSD) = 1.0900 Assume that Sam Corp. from the United States will receive EUR 5,000,000 in 90 days. Would it be better off using a forward hedge or a money market hedge? (3 points) Substantiate your answer with estimated revenue for each type of hedge-- Forward hedge (7 points) and Money market hedge (10 points). 2. (Ch. 11) Hedging With Put Options. As treasurer of Killam Corp. (a U.S. exporter to New Zealand), you must decide how to hedge (if at all) future receivables of NZD 3,000,000 (NZD = New Zealand dollar) 90 days from now. Put options are available for a premium of USD.03 per unit and an exercise price of .42 NZDUSD. The forecasted NZDUSD spot rate in 90 days follows: Future Spot Rate (NZDUSD) Probability .44 40% 50 .38 10 Given that you hedge your position with options, create a probability distribution for USD to be received in 90 days. (15 points) .40