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I would like to see the math to know if I did this right for #14, 15, 16 14. Which of the following reflects a
I would like to see the math to know if I did this right for #14, 15, 16
14. Which of the following reflects a hedge of net receivables on British pounds by a US firm? A. purchase a currency put option in British pounds B. sell forward contract on pounds C. borrow US dollars, convert them to pounds, and invest in a British pound deposit DA andB E. A, B and C 15. If interest rate parity exists and transaction costs are zero, the hedging of payables with a forward hedge will: A. have the same result as a call option hedge on payables B. have the same result as a put option hedge on payables Chave the same result as a money market hedge on payables D. require more dollars than a money market hedge A call option exists in British pounds with an exercise price of $1.60, a 90 day expiration date, and a premium of S03 per unit. A put option exists on British pounds with an exercise price of $1.60, a 90 day expiration date, and a premium of $.02 per unit. You plan to purchase options to cover your future receivables of 16. nds in 90 days. You will exercise the option in 90 days if at all. You expect the spot rate of the pound to be $1.57 in 90 days. Determine the amount of dollars to be received, after deducting payment for the option premium A. $1,169,000 B. $1,099,000 1,106,000 $1,143,000 E. $1,134,000 Step by Step Solution
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