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Question 10 10 pts This question is very hard! Consider it like extra credit. Recall the problem we discussed for the class activity on 10/23:

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Question 10 10 pts This question is very hard! Consider it like extra credit. Recall the problem we discussed for the class activity on 10/23: You are a discount retailer selling shoes that you import from Vietnam (currency: Vietnamese Dong (VND]). They charge you 250,000 VND per shoe. The current exchange rate is 23,243 VND/$. Now consider the following risk-sharing agreement: If the exchange rate rises above 25,000 VND/$, the retailer will charge you 10x VND per shoe, where x is the exchange rate in VND/$. (Note that 10 is the dollar cost of the shoe at a price of 250,000 VND if the exchange rate is 25,000 VND/$). If the exchange rate falls below 21,000 VND/$, the retailer will charge you 11.9x VND per shoe, where x is the exchange rate in VND/$. (Note that 11.9 is roughly the dollar cost of the shoe at a price of 250,000 VND if the exchange rate is 21,000 VND/$). It turns out that you could essentially mimic this agreement using options. Can you describe an option strategy that you could take to limit your risk in a way that is similar to this risk-sharing agreement? BIU A HTML Editore I E 11 X X TT 12pt

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