The current exchange rate is 125 100 and a British firm offers a French

# The current exchange rate is 125 100 and a british

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16. The current exchange rate is €1.25 = £1.00 and a British firm offers a French customer the choice of paying a £10,000 bill due in 90 days with either £10,000 or €12,500.A.The seller has given the buyer an at-the-money put option on euro with a strike in pounds.B. The seller has given the buyer an at-the-money put option on pounds with a strike in euro.C. The seller has given the buyer an at-the-money call option on euro with a strike in pounds.D. None of the abovein 90 days the customer will pay with the cheaper currency. If at maturity, S90(€/£) < €1.25 / £1.00 he will pay with pounds (exercising a put option on euro with a strike in pounds) and if S90(€/£) > €1.25 / £1.00 he will pay with euro (exercising a call option on pounds with a strike in euro).13
17. ABC Inc., an exporting firm, expects to earn \$20 million if the dollar depreciates, but only \$10 million if the dollar appreciates. Assume that the dollar has an equal chance of appreciating or depreciating. Calculate the expected tax of ABC if it is operating in a foreign country that has progressive corporate taxes as shown below: Corporate income tax rate = 15% for the first \$7,500,000.Corporate income tax rate = 30% for earnings exceeding \$7,500,000. Expected tax:14