Question
Muntie Ltd is a MNC and a local company that has bid on a project ponsered by the canadian government. If the bid is accepted
Muntie Ltd is a MNC and a local company that has bid on a project ponsered by the canadian government. If the bid is accepted Muntie will neede approximately 500,000 canadian dollars to purchase canadian material and services on Jan 20, 2017. Assume options on canadian dollar come in units of 50,000. Assume also that the exercise price on canadian dollar is 3.700 GHS for Jan 20, 2017 and the call optoion premium is 0.020 GHS per unit.
a) How many Muntie Ltd use currency options to hedge its imports?
b) How many contracts will Muntie Ltd need?
c) Hoe much will it cost Muntie Ltd this option?
d) What will be the maximum amount needed to purchase the canadian dollar on maturity
e) If the spot price for canadian dollars on maturity is 3.69 GHS, would you recommend to management of Muntie Ltd, and will will be their financial implication?
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