On the settlement date compare the option price (DKK5.85)with the prevailing spot (DKK 5.98) to determine whether the option would be exercised or allowed to lapse.Exercise (‘buy the low number’).
11. If the options market is employed as a hedge, and if on the very last day of theoption maturity, the spot rate would be DKK 5.50, calculate the total outcome of theoption hedge. The company uses its WACC when it enters the options market.
12. If the company chooses not to hedge at all, the outcome is known (=1), unknown(=2).
14. If the company chooses not to hedge at all and its forecasts turn out to be correct,calculate the outcome of this scenario.