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Unformatted text preview: per yen. The loss is 100 0 0011 . millions of dollars or $110,000. Problem 1.29. Discuss how foreign currency options can be used for hedging in the situation described in Example 1.1 so that (a) ImportCo is guaranteed that its exchange rate will be less than 1.6600, and (b) ExportCo is guaranteed that its exchange rate will be at least 1.6200. Problem 1.31. On July 17, 2009, an investor owns 100 Google shares. As indicated in Table 1.2, the share price is $430.25 and a December put option with a strike price $400 costs $21.15. The investor is comparing two alternatives to limit downside risk. The first involves buying one December put option contract with a strike price of $400. The second involves instructing a broker to sell the 100 shares as soon as Googles price reaches $400. Discuss the advantages and disadvantages of the two strategies....
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- Spring '11