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may i have the anserwd typed! thank you A U.S. firm has a payable of 125,000 Swiss francs in 90 days. The current spot rate
may i have the anserwd typed! thank you
A U.S. firm has a payable of 125,000 Swiss francs in 90 days. The current spot rate is $.6698/SFr and the 90 day forward rate is $.6776/SFr. strike=$.68, 90 day call option on SFr: premium=$.0096 90 day put option on SFr: premium=$.0105 strike=$.68, 3% Interest rates US Switz. Possible spot rate in 90 days 90 day deposit rate 3% Spot Probability 90 day borrowing rate 3.2% 3.2% $.65 10% $.67 $.69 20% 70% Calculate the expected dollar cost of the payable for each of the following: (1) FORWARD HEDGE (2) MONEY MARKET HEDGE (3) OPTION HEDGE(S) (4) REMAINING UNHEDGED Should the firm hedge? If so, how? Consider both cost and risk in your decision Step by Step Solution
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