Answered step by step
Verified Expert Solution
Question
1 Approved Answer
UCD (U.S. based MNC) will receive 450,000 euros in one year. The spot exchange rate today is $1.1600 per euro. It observes that 1. The
UCD (U.S. based MNC) will receive 450,000 euros in one year. The spot exchange rate today is $1.1600 per euro. It observes that 1. The one-year interest rate for euros is 5%, and the one-year interest rate for U.S. dollars is 2%. 2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.1550 per euro, and a premium of $0.025 per euro. 3. In the forward market, the one-year forward rate exhibits a 4% discount from the current spot exchange rate. What are the expected U.S. dollars UCD ends up receiving for its 450,000 euro receivable based its exchange rate forecasting given below? Scenario 1 2 3 Spot Exchange Rate One Year Later Probability $1.1450 55% $1.1650 15% $1.1700 30% $506,025.00 $511,200.00 $522,450.00. $508,500.00 UCD (U.S. based MNC) will receive 450,000 euros in one year. The spot exchange rate today is $1.1600 per euro. It observes that 1. The one-year interest rate for euros is 5%, and the one-year interest rate for U.S. dollars is 2%. 2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.1550 per euro, and a premium of $0.025 per euro. 3. In the forward market, the one-year forward rate exhibits a 4% discount from the current spot exchange rate. What are the expected U.S. dollars UCD ends up receiving for its 450,000 euro receivable based its exchange rate forecasting given below? Scenario 1 2 3 Spot Exchange Rate One Year Later Probability $1.1450 55% $1.1650 15% $1.1700 30% $506,025.00 $511,200.00 $522,450.00. $508,500.00
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