D none of the options c q12 a japanese exporter has a

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D) none of the options C Q12) A Japanese exporter has a €1,000,000 receivable due in one year . Detail a strategy using a money market hedge that will eliminate any exchange rate risk. 1-year rates of interest BID ASK Dollar 4.0% 4.5% Euro 5.25% 6.0% Yen 0.75% 1.0% Spot exchange rates 1-year Forward Rates $ 1.25 = 1.00 $ 1.2262 = 1.00 $ 1.00 = ¥ 100 $ 1.03 = ¥ 100
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A) Lend €943,396.22 today. Convert the euro to dollars at the spot exchange rate, convert these dollars to yen at the spot rate. B) Borrow €970,873.79 today. Convert the euro to dollars at the spot exchange rate, receive $1,165,048.54. Convert these dollars to yen at the spot rate, receive ¥. C) Borrow €943,396.22 today. Convert the euro to dollars at the spot exchange rate, convert these dollars to yen at the spot rate, receive ¥117,924,528.30. D) Convert ¥117,924,528.30 to dollars at the spot rate; convert dollars to euro at the spot rate; lend €943,396.22 at 5.25 percent. C Q13) A U.S. firm has sold an Italian firm €1,000,000 worth of product. In one year the U.S. firm gets paid. To hedge, the U.S. firm bought put options on the euro with a strike price of $1.65. They paid an option premium $0.01 per euro. If at maturity, the exchange rate is $1.60. Assume zero interest rate. A) the firm will realize $1,660,000 on the sale net of the cost of hedging. B) the firm will realize $1,590,000 on the sale net of the cost of hedging. C) the firm will realize $1,640,000 on the sale net of the cost of hedging. D) none of the options D Q14) Buying a currency option provides A) a right, but not an obligation, to buy or sell a currency. B) limits the downside risk while preserving the upside potential. C) a flexible hedge against exchange exposure. D) all of the options C Q15) XYZ Corporation, located in the United States, has an accounts payable obligation of ¥750 million payable in one year to a bank in Tokyo. Which of the following is not part of a money market hedge? A) Buy yen at the spot exchange rate. B) Invest in risk-free Japanese securities with the same maturity as the accounts payable obligation. C) Buy the ¥750 million at the forward exchange rate. D) Find the present value of ¥750 million at the Japanese interest rate. C Q16) 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. The future dollar cost of meeting this obligation using the forward hedge is A) $6,880,734. B) $6,545,400. C) $6,653,833. D) $6,450,000. A Q17) A call option to buy £10,000 at a strike price of $1.80 = £1.00 is equivalent to A) a put option on £10,000 at a strike price of $1.80 = £1.00. B) a call option on $18,000 at a strike price of $1.80 = £1.00. C) a put option to sell $18,000 at a strike price of $1 = £0.5556.
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