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2. Assume Bariation Corp. has future receivables of NZ$500,000 in one year. The existing spot rate for the New Zealand dollar is $0.60/NZ$. The forward
2. Assume Bariation Corp. has future receivables of NZ$500,000 in one year. The existing spot rate for the New Zealand dollar is $0.60/NZ$. The forward rate of the New Zealand dollar is $0.62/NZ$. One year put options on the New Zealand dollar, with an exercise price of $0.63/NZ$ and a premium of $0.04 per NZ dollar. One-year call options on the NZ dollar are available with an exercise price of $0.60/NZ$ and a premium of $0.03 per NZ dollar. In the US Bariation Corp can borrow at 9% and lend at 8%. In New Zealand they can borrow at 6% and lend at 5% If the expected future spot rate is $0.64 per NZ dollar a) Calculate the expected dollar cost at time 1 if you hedge with a forward contract. b) Calculate the expected dollar cost at time 1 if you hedge with a money market hedge. c) Calculate the expected dollar cost at time 1 if you hedge with an options contact. In each case, be sure to show all work in detail to earn full credit for the
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