SUPPOSE IT IS THURSDAY SEPT 16TH AND ORIGINE AN IMPORTER OF SWISS WATHCES TO THE UNITED STATES HAS AN ACCOUNT PAYABLE OF CHF 50000 DUE ON WEDNESDAY DEC 15. THE FOLLOWING DATA ARE AVAILABLE.

SPOT RATE: $0.7142/CHF

90 DAY FORWARD RATE $0.7144/CHF

US DOLLAR 90 DAY INTEREST RATE: 5.33% P.A

OPTIONS DATA FOR DECEMBER CONTRACT, $/CHF

STRIKE PREMIUM CALL PREMIUM PUT

0.720 0.0155 0.240

REQUIRED:

DETERMINE THE TOTAL COST IN DOLLARS OF HEDGING THE PAYABLE USING A FORWARD CONTRACT

DETERMINE THE MAXIMUM COST OF HEDGING WITH AN OPTION CONTRACT

ON AXES REPRESENTING FUTURE EXCHANGES RATES AND TOTAL COSTS SHOW THE GRAPHS REPRESENTING FOLLOWING STRATEGIES ADOPTED BY ORIGINE

A) DO NOTHING STRATEGY

B) FORWARD CONTRACT HEDGE STRATEGY

C) an option contract hedge strategy