A/P Amount Option Information Strike Price Premium $1,000,000.00 CALL or PUT? $ 0.34 per TRL Accounts Payable of TRL1,000,000 Premium (today) FV of Premium in 1 month 1.25% of the current spot rate for one foreign currency. Money Market Information US Investing (Lending) Rate 2.0% Turkey 7.5% INVEST or BORROW TRL? How much to invest/borrow in TRL? Borrowing Rate 3.0% 8.0% How much it worths in dollars today? FV of borrowing or investing Exchange Rate Information 5 1-month Forward Rate S 0.3400 per TRL 6 Current Spot Rate $ 0.3200 per TRL BUY or SELL TRL Forward? 7 8 Cash outflows - 1 Month from Now 9 Unhedged 20 Spot rate in 1 month Strike Price Cash Flow Forward Hedge Cash Flow Option Hedge Money Market Hedge Exercise Decision Cash Flow Cash Flow 21 0.25 0.34 22 0.26 0.34 23 0.27 0.34 24 0.28 0.34 25 0.29 0.34 26 0.3 0.34 27 0.31 0.34 28 0.32 0.34 29 0.33 0.34 30 0.34 0.34 31 0.35 0.34 32 0.36 0.34 33 0.37 0.34 34 0.38 0.34 35 0.39 0.34 36 0.4 0.34 37 0.41 0.34 38 0.42 0.34 39 0.43 0.34 40 41 42 43 44 45 46 47 48 49 50 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: Which alternative is better if Spot > BE? Break-even spot rate between Money Market and Forward Hedges - Just Explain your answer +