1. You are the CEO of a US companys subsidiary in India. Your subsidiary, as many other foreign companies in India, imports components from other parts of the world, including the US. In May 2013 your subsidiary made an order for 1,000 units of equipment components manufactured in the US, which should be shipped to India by September 2013, when the payment of $50,000 is due. The exchange rate in May 2013 was 1 INR = $0.0185. After the US Fed announced future changes in its policy in summer 2013, which would lead to increase in interest rates in the US, your analyst made calculations that the Indian rupee would depreciate further from its rate in July 2013 of 1 INR = $0.0168 to 1 INR = $0.015 by September 2013. Despite continuing depreciation of the Indian rupee, your subsidiary still would have to pay the US supplier $50,000 in September 2013. You decided to hedge against further depreciation of the Indian rupee by entering into a 60-day forward exchange transaction with a foreign exchange dealer at the rate of 1 INR = $0.0158. By entering into this 60-day forward exchange transaction guaranteed you that you would have to pay no more than _______ INR for $50,000 in September 2013.

a. 2,702,702.70

b. 2,976,190.48

c. 3,333,333.33

d. 3,164,556.96

2. You are the CEO of a US companys subsidiary in India. Your subsidiary, as many other foreign companies in India, imports components from other parts of the world, including the US. In May 2013 your subsidiary made an order for 1,000 units of equipment components manufactured in the US, which should be shipped to India by September 2013, when the payment of $50,000 is due. The exchange rate in May 2013 was 1 INR = $0.0185. After the US Fed announced future changes in its policy in summer 2013, which would lead to increase in interest rates in the US, your analyst made calculations that the Indian rupee would depreciate further from its rate in July 2013 of 1 INR = $0.0168 to 1 INR = $0.015 by September 2013. Despite continuing depreciation of the Indian rupee, your subsidiary still would have to pay the US supplier $50,000 in September 2013. You decided to hedge against further depreciation of the Indian rupee by entering into a 60-day forward exchange transaction with a foreign exchange dealer at the rate of 1 INR = $0.0158. Thus, the spot exchange rate at the time of your decision to hedge is ________ and the forward exchange rate is ____________.

a. 1 INR= $0.0185; 1 INR= $0.0168

b. 1 INR = $0.0185; 1 INR = $0.015

c. 1 INR = $0.0185; 1 INR = $0.015

d. 1 INR= $0.0168; 1 INR= $0.0158

e. 1 INR = $0.015; 1 INR = $0.0168