A U.S. insurance company, sells real estate in Japan for 250 billion, when the spot rate is 105/$, but money will change hands three-months hence. In the CME, yen options have a standard size of 12,500,000. How many USD will he have in three months if he hedged by buying at-the-money yen puts and if each put costs $1,000?

$ 2,380,952,381

$2,777,534,765

$2,360,952,381

$19,841,269.84.

How many USD will he have if he did not hedge, and if three months hence the spot rate is 120/$?

$2,083,333,333

$ 2,380,952,381

$2,777,534,765

$2,360,952,381

Assume that the current spot rate is $1 per Canadian dollar, and that nominal interest rates on one-year loans in the U.S. and Canada are 3% and 8% respectively. What rate of return will you have earned in USD, if you borrowed $100,000 in the U.S. and loaned the money in Canada, and if one-year hence the spot rate is $0.9537 per Canadian dollar?

5%

3%

2.5%

1.2%

zero%

Today the spot rate is $1.15 per euro and a U.S. investor buys one million dollars of a European mutual fund at a price of 20 per share. One year later the shares have appreciated to 22.4. What rate of return would he have earned in U.S. dollars if the spot rate at that point is $0.9 per euro?

4%

1.5%

1.7%

0.8%

4.35%.