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The spot rate on the euro is $1.2000/, while the three-month forward rate is $1.2500/. A call option on euros is written with a strike
The spot rate on the euro is $1.2000/, while the three-month forward rate is $1.2500/. A call option on euros is written with a strike price of $1.2000/ at a premium of $0.005/ and with an expiration date three months from now. A put option on euros is written with a strike price of $1.2000/ at a premium of $0.004/ and with an expiration date three months from now. Each option is for 100,000. a. If a U.S. corporation wants to use options to hedge against an accounts receivable for the amount of 400,000 to be received in 3 months, given the information provided above, the company should L_ (buy or sell) (how many) (put or call) options b. What's the total cost (Premium) of the option hedging? c. If the spot rate in 3 months turns out to be $1.2400/, what should the company do to convert 400,000 to $
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