Item11

Time Remaining 38 minutes 25 seconds

00:38:25

Item 11

Time Remaining 38 minutes 25 seconds

00:38:25

A U.S. firm has sold an Italian firm 1,000,000 worth of product. In one year the U.S. firm gets paid. To hedge, the U.S. firm bought put options on the euro with a strike price of $1.65. They paid an option premium $0.01 per euro. Assume the one-year dollar interest rate is 6.1% and at maturity, the exchange rate is $1.60,