You will receive a large sum of Canadian dollars in 30 days. The current spot price ($/Cans) is Bid $0.7500 and Ask $0.7510. The 30-day forward rate is Bid 50.7415 and Ask 50.7230 dollar inflow, you are considering using either the forward market or options. Data for options expiring in December are as follows: State how are you going to hedge in the forward market? (4 points) (D) State How are you going to hedge in options market? (4 points) Draw a graph showing both forward and option payoffs. In the diagram show the following What is the breakeven point for the options contract? (4 pta) What the spot rate must be in 30 days such that you receive that same amount of U.S.dollars regardless of whether you hedge using the 6) You believe that the following probability distribution characterizes the relevant spor sans exchange rate in 30 day market or options. (4 ) SACS Praha Than 0.7600 $0.7400 to $0.7499 $0.7500 and above Based on your ponte in part and the above probably data how would you here the Canadian dollar inflow. In you response bear de a large sum of Canadian dollars in 30 days. The current spotprice (S/Cans) is Bid $0.7500 and Ask $0.7510. The 30-day forward rate is Bid $0.7415 and Ask $0.7430 pe the Canadian dollar inflow, you are considering using either the forward market or options. Data for options expiring in December are as follows: Strike Pace 50.7.400 a) Stare how are you going to hedge in the forward market? (4 points) b) State How are you going to hedge in options market? (4 points) Draw a graph showing both forward and option payoffs. In the diagram show the following What is the breakeven point for the options contract di What the spot rate must be in 30 days such that you receive that same amount of US dollar reparden of whether you hedge You believe that the following probability distribution characterizes the relevant sporicant exchange rate in 30 da market or options. (pt) Probably change rate Less Than 0.7-400 10% 50 7400 to $0.7499 $0.7500 and above 100% Based on you response in part and the above probably data how would you here the Canadan dollar now. In you response be as eta polis - You will re 10U will receive a LARGE SUM OF CANADIAN DOLLARS IN 30 DAYS. THE CURRENT SPOT PRICE (3/Cans) is BID # 0.7500 AND ASK $0.1510. THE 30-DAY FORWARD RATE IS BID $0.7415 AND ASK $0.7430. TO HEDGE THE CANADIAN DOLLAR INFLOW, YOU ARE CONSIDERING USING EITHER THE FORWARD MARKET OR OPTIONS. DATA FOR OPTIONS EXPIRING IN DECEMBER ARE AS FOLLOWS PREMIUMIC$ STRIKE PRICE CALL PUT $0.7400 cents 1.65 0.88 A STATE HOW ARE YOU GOING TO HEDGE IN THE FORWARD MARKET? B STATE HOW ARE YOU GOIN TO HEDGE IN OPTIONS MARKET? DRAW A GRAPA SHOWING BOTH FORWARD AND OPTIONS PAYOFFS. IN THE DIAGRAM, SHOW THE FOLLOWING: (C) WHAT IS THE BREAKEVEN POINT FOR THE OPTIONS CONTRACT?! D WHAT THE SPOT RATE MUST BE IN 30 DAYS SUCH THAT YOU RECEIVE THAT SAME AMOUNT OF US dollARS ON REGARDLESS OF WHETHER YOU HEDGE USING THE FORWARD MARKET OR OPTIONS (E YOU BELIEVE THAT THE FOLLOWING PROBABILITY DISTRIBUTION CHARACTERIZES THE RELEVANT Spot $/can$ EXCHANGE RATE IN 30 DAYS. $(BCAN EXCHANGE RATE PROBABILITY LESS THAN 0.1400 10% $0.7400 to $0.7499 25% $0.7500 and above 65% IDDY BASED On (A) AND ABOVE PROBABILLTY DATA, LOW WOULD YOU HEDGE THE CANADIAN DOLLAR INFLOW, IN DETAIL You will receive a large sum of Canadian dollars in 30 days. The current spot price ($/Cans) is Bid $0.7500 and Ask $0.7510. The 30-day forward rate is Bid 50.7415 and Ask 50.7230 dollar inflow, you are considering using either the forward market or options. Data for options expiring in December are as follows: State how are you going to hedge in the forward market? (4 points) (D) State How are you going to hedge in options market? (4 points) Draw a graph showing both forward and option payoffs. In the diagram show the following What is the breakeven point for the options contract? (4 pta) What the spot rate must be in 30 days such that you receive that same amount of U.S.dollars regardless of whether you hedge using the 6) You believe that the following probability distribution characterizes the relevant spor sans exchange rate in 30 day market or options. (4 ) SACS Praha Than 0.7600 $0.7400 to $0.7499 $0.7500 and above Based on your ponte in part and the above probably data how would you here the Canadian dollar inflow. In you response bear de a large sum of Canadian dollars in 30 days. The current spotprice (S/Cans) is Bid $0.7500 and Ask $0.7510. The 30-day forward rate is Bid $0.7415 and Ask $0.7430 pe the Canadian dollar inflow, you are considering using either the forward market or options. Data for options expiring in December are as follows: Strike Pace 50.7.400 a) Stare how are you going to hedge in the forward market? (4 points) b) State How are you going to hedge in options market? (4 points) Draw a graph showing both forward and option payoffs. In the diagram show the following What is the breakeven point for the options contract di What the spot rate must be in 30 days such that you receive that same amount of US dollar reparden of whether you hedge You believe that the following probability distribution characterizes the relevant sporicant exchange rate in 30 da market or options. (pt) Probably change rate Less Than 0.7-400 10% 50 7400 to $0.7499 $0.7500 and above 100% Based on you response in part and the above probably data how would you here the Canadan dollar now. In you response be as eta polis - You will re 10U will receive a LARGE SUM OF CANADIAN DOLLARS IN 30 DAYS. THE CURRENT SPOT PRICE (3/Cans) is BID # 0.7500 AND ASK $0.1510. THE 30-DAY FORWARD RATE IS BID $0.7415 AND ASK $0.7430. TO HEDGE THE CANADIAN DOLLAR INFLOW, YOU ARE CONSIDERING USING EITHER THE FORWARD MARKET OR OPTIONS. DATA FOR OPTIONS EXPIRING IN DECEMBER ARE AS FOLLOWS PREMIUMIC$ STRIKE PRICE CALL PUT $0.7400 cents 1.65 0.88 A STATE HOW ARE YOU GOING TO HEDGE IN THE FORWARD MARKET? B STATE HOW ARE YOU GOIN TO HEDGE IN OPTIONS MARKET? DRAW A GRAPA SHOWING BOTH FORWARD AND OPTIONS PAYOFFS. IN THE DIAGRAM, SHOW THE FOLLOWING: (C) WHAT IS THE BREAKEVEN POINT FOR THE OPTIONS CONTRACT?! D WHAT THE SPOT RATE MUST BE IN 30 DAYS SUCH THAT YOU RECEIVE THAT SAME AMOUNT OF US dollARS ON REGARDLESS OF WHETHER YOU HEDGE USING THE FORWARD MARKET OR OPTIONS (E YOU BELIEVE THAT THE FOLLOWING PROBABILITY DISTRIBUTION CHARACTERIZES THE RELEVANT Spot $/can$ EXCHANGE RATE IN 30 DAYS. $(BCAN EXCHANGE RATE PROBABILITY LESS THAN 0.1400 10% $0.7400 to $0.7499 25% $0.7500 and above 65% IDDY BASED On (A) AND ABOVE PROBABILLTY DATA, LOW WOULD YOU HEDGE THE CANADIAN DOLLAR INFLOW, IN DETAIL
