Question 7 1 pts We'R' SlightlyNervous, a US-based MNC, will need 500,000 a year from now, and decides to lock into a rate of 2.00$/ and purchase a forward contract right now. A year later, at the time when the delivery on the forward contract is made, the spot exchange rate turns out to be 1.95$/. The company, by purchasing the forward contract instead of waiting to buy the at the spot rate, (saved/lost) $. Lost $25,000 Saved $50,000 Saved $100.000 Neither saved nor lost Lost $50,000 Lost $75,000 Lost $100,000 Saved 575.000 Savod $25,000 Question 8 1 pts The spot exchange rate for the euro is $1.25, and the 6-month forward is $1.45. The euro is trading at a (premium/discount) of %: Discount: 32% Premium: 16% Neither discount nor premium Discount: 8% O Premium; 32% Premium 12% Discount: 16% - Discount: 49% Premium: 896 Discount: 1236 Premium: 4% Discount: 249 Premium: 24 Question 9 1 p All of the following are terms (what needs to be spelled out) in a currency option contract, EXCEPT: What is the price per unit of foreign currency How much of a foreign currency is being bought/sold Which foreign currency is being bought/sold What is the delivery date of the contract Which party can walk away from the contract No exception, all of the listed are terms in a currency option contract Question 10 American style put option Might in some scenarios be worth exercising early because the underlying asset may become worthless, therefore maximizing the value of the option Is never worth exercising early because the holder of the option can always make more money by selling it Is always worth exercising early because an American style option is always by definition at the money. Is always worth exercising early whenever the option is in the money Is never worth exercising early because an American style option is never in the money, Is never worth exercising early because an American style option is always by definition at the money, total). You must finish by 10:50am. Question 11 Which of the following (all else being equal) does NOT help explain a currency option premium: Interest rate differential between the US and the home market of the foreign currency Inflation differential between the US and the home market of the foreign currency No exception, all of the listed explain a currency option premium Time to expiration of the option The difference between the spot and contract exchange rates Volatility of the underlying asset/currency Question 12 Which of the following is increases the value of a put option on a currency: The difference between the spot and contract exchange rates Inflation differential between the US and the home market of the foreign currency Volatility of the underlying asset/currency None of the listed Interest rate differential between the US and the home market of the foreign currency