Xyz corporation located in the united states has an

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International Financial Management
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Chapter 20 / Exercise 3
International Financial Management
Madura
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66. XYZ Corporation, located in the United States, has an accounts payable obligation of ¥750 million payable in one year to a bank in Tokyo. The current spot rate is ¥116/$1.00 and the one year forward rate is ¥109/$1.00. The annual interest rate is 3 percent in Japan and 6 percent in the United States. XYZ can also buy a one-year call option on yen at the strike price of $0.0086 per yen for a premium of 0.012 cent per yen. Assume that the forward rate is the best predictor of the future spot rate. The future dollar cost of meeting this obligation using the option hedge is A. $6,450,000.B. $6,545,400.C. $6,653,833.D. $6,880,734.
67. Your U.S. firm has a £100,000 payable with a 3-month maturity. Which of the following will hedge your liability?
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Chapter 20 / Exercise 3
International Financial Management
Madura
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Chapter 08 - Management of Transaction Exposure68. Your U.S. firm has a £100,000 payable with a 3-month maturity. Which of the following will hedge your liability?
69. Suppose that the exchange rate is €1.25 = £1.00. Options (calls and puts) are available on the London exchange in units of €10,000 with strike prices of £0.80 = €1.00.Options (calls and puts) are available on the Frankfurt exchange in units of £10,000 with strike prices of €1.25 = £1.00.For a U.K. firm to hedge a €100,000 payable,
70. Suppose that the exchange rate is €1.25 = £1.00. Options (calls and puts) are available on the London exchange in units of €10,000 with strike prices of £0.80 = €1.00. Options (calls and puts) are available on the Frankfurt exchange in units of £10,000 with strike prices of €1.25 = £1.00. For a U.K. firm to hedge a €100,000 receivable, A. buy 10 call options on the euro with a strike in pounds sterling.B. buy 8 put options on the pound with a strike in euro.C. buy 10 put options on the euro with a strike in pounds sterling.D. buy 8 call options on the pound with a strike in euro.E. both a) and b)F. both c) and d)8-40
Chapter 08 - Management of Transaction Exposure

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