Question
Use the following to answer questions 14 - 16: PQR Associates will owe EUR 100,000 in one year. It is concerned about appreciation of the
Use the following to answer questions 14 - 16: PQR Associates will owe EUR 100,000 in one year. It is concerned about appreciation of the EUR and is considering possible hedging techniques. The following market and exchange conditions apply: One Year Forward Rate EUR Interest Rate US Interest Rate USD 1.20 5% 8% Call Option Exercise Price Call Option Premium Todays Spot Rate USD 1.20 USD .03 USD 1.18 PQR has forecasted exchange rates and has developed the following probability distribution for the expected 1 year exchange rate: 1 Year Exchange Rate USD 1.16 USD 1.22 USD 1.24 Probability 20% 70% 10%
If PQR hedges with a Call Option Hedge, what is the cost of their payables in 1 year?
| USD 122,200 |
| USD 121,371 |
| USD 120,000 |
| USD 117,000 |
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Cloud Computing Data Auditing Algorithm
Authors: Manjur Kolhar, Abdalla Alameen, Bhawna Dhupia, Sadia Rubab, Mujthaba Gulam
1st Edition
1946983144, 978-1946983145
