fbe436 hw4 solution

This means you are borrowing s and depositing in s iv

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Unformatted text preview: s the synthetic forward value you get by using the appropriate borrowing/lending rates. Hedging a receivable means that you should be delivering €s forward. This means you are borrowing €s and depositing in $s. (iv) Put: 0.0870*50,000,000*1.1800 = -$5,133,000. They receive net of insurance cost (cost of the options) $53,867,000. Compare this to what they would have received without any hedge: 50,000,000*1.19 = $59,500,000. Note that if the $ had in fact appreciated beyond their expectations, they would have gained expost. 8 FBE 436 Answers to Problem Set #4 Problem (Old #4.7) #4.8 : Calculate the missing values in the table below: Maturity 90 (days) U.S. U.K. Spot Spot/Forward ($/fc): Interest Rates: 6.130% U.S. /$ 7.000% U.K. /& 4.600% Germany 1.000% Forward 1 1 1.58600 Spot Forward 0.72410 Canada U.S. 1 U.K. Japan Spot France Forward 0.01198 France 7.500% Spot Japan 8.000% Forward Germany Germany Spot Canada Forward 0.20602 Japan Spot Forward 0.73540 France Canada 1 1 1 1 1 1 1 1 1 1 9...
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This note was uploaded on 01/16/2010 for the course FBE 436 at USC.

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