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(Question 4) UB corporation Exports 100 iPhone XS to Yale country at Yen 120 per machine (Yen 12,000 in total: contracted at Yen), UB's C.F.O.
(Question 4) UB corporation Exports 100 iPhone XS to Yale country at Yen 120 per machine (Yen 12,000 in total: contracted at Yen), UB's C.F.O. asks you to hedge exporting prices against foreign currency fluctuations. Current spot exchange rate is $1 = Yen 100 and the following is the price of derivatives. UB Country (U.S.A.) Yale Country (Japan) Call(Yen 120, K = $1) = $0.03 Call($1. K = Yen 120) = Yen 3 Put(Yen 120. K = $1) = $0.07 Put($1. K = Yen 120) = Yen 4 You have to consider the cost of options !!! A) If UB wants to use Call option, which Call option to buy or sell and net cash-flow at maturity? B) If UB wants to use Put option, which Put option to buy or sell and net cash-flow at maturity? *******Sample Answer******* Buy or Sell UB or Yale S to receive Exactly or At least or At most) BUY UB CALL EXACTLY pay $777 (Sample Answer) (Answers) (A)Buy or Sell UB or Yale $ to receive/pay (Exactly or At least or At most) Call Option (B)Buy or Sell UB or Yale $ to receive/pay (Exactly or At least or At most) Put Option 3 (Question 4) UB corporation Exports 100 iPhone XS to Yale country at Yen 120 per machine (Yen 12,000 in total: contracted at Yen), UB's C.F.O. asks you to hedge exporting prices against foreign currency fluctuations. Current spot exchange rate is $1 = Yen 100 and the following is the price of derivatives. UB Country (U.S.A.) Yale Country (Japan) Call(Yen 120, K = $1) = $0.03 Call($1. K = Yen 120) = Yen 3 Put(Yen 120. K = $1) = $0.07 Put($1. K = Yen 120) = Yen 4 You have to consider the cost of options !!! A) If UB wants to use Call option, which Call option to buy or sell and net cash-flow at maturity? B) If UB wants to use Put option, which Put option to buy or sell and net cash-flow at maturity? *******Sample Answer******* Buy or Sell UB or Yale S to receive Exactly or At least or At most) BUY UB CALL EXACTLY pay $777 (Sample Answer) (Answers) (A)Buy or Sell UB or Yale $ to receive/pay (Exactly or At least or At most) Call Option (B)Buy or Sell UB or Yale $ to receive/pay (Exactly or At least or At most) Put Option 3
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