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Kansas Corporation, an American company, has a payment of 5 . 9 million due to Tuscany Corporation one year from today. At the prevailing spot
Kansas Corporation, an American company, has a payment of million due to Tuscany Corporation one year from today. At the prevailing spot rate of $ this would cost Kansas $ but Kansas faces the risk that the $ rate will fall in the coming year, so that it will end up paying a higher amount in dollar terms. To hedge this risk, Kansas has two possible strategies. Strategy is to buy million forward today at a oneyear forward rate of $ Strategy is to pay a premium of $ for a oneyear call option on million at an exchange rate of $
Suppose that in one year the spot exchange rate is $ What would be Kansass net dollar cost for the payable under each strategy?
Note: Round your answer to the nearest whole dollar amount.
Suppose that in one year the spot exchange rate is $ What would be Kansass net dollar cost for the payable under each strategy?
Note: Round your answer to the nearest whole dollar amount.
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