ESTE Remaining Time: 1 hour, 08 minutes, 14 seconds. Question Completion Status: CVT, a U.S.A based company has just signed a contract to Sell light rail cars to a Customer in Germany for euro 5,000,000. The sale was made in June with payment due thre September. Because this is a sizable contract for the firm and because the contract is in euros rather than dollars, CVT is considering several hedging alternatives to reduce the risk arising from the sale. To help the firm make a hedging decision you have gathered the following information The spot exchange rate is $1.120 euro The three month forward rate is $1.10 euro CVT's cost of capital is 14% The Euro zone 3-month borrowing rate is 8 The Euro zone 3-month Invesment rate is 6 The U.S. 3-month borrowing rate 15 9 The U.S. 3-month Invesment rate 15 70 September call options for euro; strike price $1.16 curo, premium price is 1 506 September put options for euro, strike $1.17 euro, premium price is 1.3 CVT's forecast for 3-month spot rates is $1.17 euro a) How can CVT hedge its transaction exposure in the forward market? What is the amount in dollars received from the accounts receivable in 6 months will be posts) b)Explain how can CVT use the money market to hedge the payable? What are the proceeds in USD from the euro receivable pour) c) What is the WACC at which CVT will be indifferent between the forward market and money market hedge? 3 points) d What is the minimum future dollar received from the account recevable using the option hedge. Make sure to mention the campion pouss) ? ESTE Remaining Time: 1 hour, 08 minutes, 14 seconds. Question Completion Status: CVT, a U.S.A based company has just signed a contract to Sell light rail cars to a Customer in Germany for euro 5,000,000. The sale was made in June with payment due thre September. Because this is a sizable contract for the firm and because the contract is in euros rather than dollars, CVT is considering several hedging alternatives to reduce the risk arising from the sale. To help the firm make a hedging decision you have gathered the following information The spot exchange rate is $1.120 euro The three month forward rate is $1.10 euro CVT's cost of capital is 14% The Euro zone 3-month borrowing rate is 8 The Euro zone 3-month Invesment rate is 6 The U.S. 3-month borrowing rate 15 9 The U.S. 3-month Invesment rate 15 70 September call options for euro; strike price $1.16 curo, premium price is 1 506 September put options for euro, strike $1.17 euro, premium price is 1.3 CVT's forecast for 3-month spot rates is $1.17 euro a) How can CVT hedge its transaction exposure in the forward market? What is the amount in dollars received from the accounts receivable in 6 months will be posts) b)Explain how can CVT use the money market to hedge the payable? What are the proceeds in USD from the euro receivable pour) c) What is the WACC at which CVT will be indifferent between the forward market and money market hedge? 3 points) d What is the minimum future dollar received from the account recevable using the option hedge. Make sure to mention the campion pouss)