ACCOUNTS PAYABLE

You import textile products from Turkey and you agree that you will pay TRL$1,000,000$ in one month from now.

Spot rate: $$\frac{0\mathrm{.}32}{?}$ TRY

Forward Information: $1-$month forward rate is $$\frac{0\mathrm{.}34}{?}$ TRL$.$

Option Information:

Strike Price: $$\frac{0\mathrm{.}34}{?}$ TRL

Premium: $1\mathrm{.}25\%$ of the current spot rate $($for one foreign currency$)$

Money Market Information

Money market information

Borrowing rate $($APR$)$

Investing $($lending$)$ rate $($APR$)$

US

Turkey

$3\%$

$8\%$

$2\%$

$7\mathrm{.}5\%$

Your to do list:

Complete any orange$-$colored cells on the posted Excel Sheet.

Draw the graph of all cash flows on Excel where the $x-$axis represents the spot rate and $y-$axis represents the cash flows.

Calculate the break$-$even spot rate between Option Hedge and Money Market Hedge. You don't have to show your calculation, just look at the graph and decide the Break Even Spot rate. Which hedge is better if SPOT$>$BE$?$

Calculate the break$-$even spot rate between Money Market Hedge and Forward Position. Explain your answer.

YOU SHOULD USE FORMULAS IN THE EXCEL SHEET. DO NOT CALCULATE YOUR ANSWERS AND WRTIE THE NUMBERS IN THE CELLS. I WILL DEDUCT POINTS IF I DON'T SEE YOUR FORMULAS IN THE EXCEL SHEET BECAUSE I WON'T KNOW HOW YOU GET THAT NUMBER!