Q 17 to Q 22 combined:

Melbourne Corp has future receivables of 10,000,000 (10 mio) New Zealand dollars (NZD) in one year from now. It must decide whether to use options or a forward market hedge to hedge this position. Use the following information. Today's spot exchange rate of NZD versus USD is 0.54 USD per NZD. The one-year Forward rate is 0.50 USD per NZD.

One year call option: Exercise price = 0.50 USD per NZD; premium = 0.07 USD per NZD One year put option: Exercise price = 0.52 USD per NZD; premium = 0.03 USD per NZD

Q 17: Suppose Melbourne Corp uses a forward contract. How many USD will Melbourne Corp be able to convert 10 mio NZD into? give the answer to the nearest USD.