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ABC is a US company that just bought goods from a French company for 500 million euros with payment due in 4 months. Assume the
ABC is a US company that just bought goods from a French company for 500 million euros with payment due in 4 months. Assume the following:
Spot rate is $1.30/
4 month forward rate is $1.31/
4 month French interest rate 8% p.a
4 month US interest rate is 6% p.a
4 month call option on euros at a strike price of $1.29/ with a 3% premium
4 month put option on erupts at a strike price of $1.305/ with a 4% premium
The proceeds of the forward market hedge is...?
The proceeds of the money market hedge is...?
The future value of the appropriate premium is...?
The break even exchange rate between the forward market hedge and your option alternative is...?
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