Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Rimfire Pacific Mining is an Australian ASX-listed gold and copper resources exploration company. The company has incurred a payable of EUR625,000, due in 200 days.
Rimfire Pacific Mining is an Australian ASX-listed gold and copper resources exploration company. The company has incurred a payable of EUR625,000, due in 200 days. Consider the following prices: Bid Ask Spot rate at t = 0 0.8335 0.8391 Forward rate at t = 200 0.8381 0.8441 200-day put at AUDO.800/EUR 0.0435 0.0484 200-day call at AUDO.833/EUR 0.0526 0.0572 200-day annualised AUD interest rate 1.17% 1.39% 200-day annualised EUR interest rate 5.41% 5.56% Suppose the option contract size is EUR125,000 and the firm has a policy of using enough option contracts to fully hedge their exposure. Upfront hedging costs (brokerage fees and option premiums, etc) are funded with locally sourced debt. There are 360 days in a year. Which of the following is the actual net realized value in AUD of Rimfire Pacific Mining's payable if the firm uses an option to hedge exchange rate risk? O a. AUD549,713.57 O b. AUD546,818.61 O c. AUD544, 173.34 O d. AUD541,087.19 O e. AUD550,544.02 O f. None of the choice answers in this question are correct
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started