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Intro Blunt Aesthetics is a U.S. fashion retailer which imports products from Europe. The company will need 100,000 euros () in one year to pay
Intro Blunt Aesthetics is a U.S. fashion retailer which imports products from Europe. The company will need 100,000 euros () in one year to pay its Italian and French suppliers. The firm expects the following exchange rate scenarios and probabilities: The spot rate is $1.2 per euro and the one-year forward rate is $1.202 per euro. The U.S. interest rate is 5% and the euro interest rate is 2%. A call option on euros expiring in one year costs $0.044 per euro and has an strike price of $1.2 per euro. Part 1 Attempt 2/2 for 0 pts. What is the expected cost of obtaining $100,000 euros in one year if the company does not hedge its payables (in $ )? Incorrect Part 2 Attempt 1/2 for 5 pts. What is the total cost if Blunt uses a foward contract to buy euros (in $ )? Correct Part 3 Attempt 1/2 for 5 pts. What is the total cost of creating a money market hedge, including interest (in \$)
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