A call option to buy 10000 at a strike price of 180

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30A call option to buy £10,000 at a strike price of $1.80 = £1.00 is equivalent toa)A put option to sell $18,000 at a strike price of $1.80 = £1.00.b)A call option on $18,000 at a strike price of $1.80 = £1.00c)A put option on £10,000 at a strike price of $1.80 = £1.00.d)None of the aboveAnswer: a)
31XYZ 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 3percent in Japan and 6 percent in the United States. XYZ can also buy a one-year calloption on yen at the strike price of $0.0086 per yen for a premium of 0.012 cent peryen. Assume that the forward rate is the best predictor of the future spot rate. Thefuture dollar cost of meeting this obligation using the option hedge is:
Cross-Hedging Minor Currency Exposure32 A minorcurrency is
33A U.S.-based MNC with exposure to the Swedish krona could best cross-hedge with
34When cross-hedging,a)Try to find one asset that has a positive correlation with another asset.b)The main thing is to find one asset that covaries with another asset in somepredictable way.c)Try to find one asset that has a negative correlation with another asset.d)None of the aboveAnswer: b)Rationale: a) and c) could work, but answer b) is the most correct.Hedging Contingent Exposure
35 Your firm is bidding on a large construction contract in a foreign country. Thiscontingent exposure could best be hedged
Eun/Resnick 4e103

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