A Japanese firm, which exports to the U$.$S$.,$ has an account receivable of US$$5$million in $90$

days. The current $($today$$s$)$ spot rate is $100\mathrm{.}50/$US$ and the firm is worried that the value of

US$ would fall. The firm has asked you to hedge a minimum $$ value of US$ received, so you

get an $$at the money$$ put option on US$ with a premium of $2\mathrm{.}2$ per US$$.$

Note: Show your work and keep you answers to $4$ decimal points if necessary.

a$)$ If the $90-$day $($spot$)/$US$ exchange rate were $97\mathrm{.}45,$ how much would the firm receive in

total? $(6$ points$)$

b$)$ For what ranges of the $/$US$ $($spot$)$ exchange rates in $90$ days, would the firm exercise the

option contract? $(4$ points$)$

c$)$ What is the minimum $$ value per US$ would the firm receive in $90$ days? $(4$ points$)$

d$)$ For what range of the $/$US$ $($spot$)$ exchange rates in $90$ days, would the loss in the $$ value

of the firm$$s hedged position be greater than that of the open position? $(6$ points$)$