# Your firm is a uk based importer of bicycles you have

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11. Your firm is a U.K.-based importer of bicycles. You have placed an order with a Swiss firm for SFr. 1,000,000 worth of bicycles. Payment (in Swiss francs) is due in 12 months. Use a money market hedge to redenominate this one-year receivable into a euro-denominated receivable with a one-year maturity.The following were computed without rounding. Select the answer closest to yours. A. £500,000B.£464,874.41C. £446,730.77D. £509,900.99
Buy the present value of SFr. 1million; pay . PayBorrow at 3% To redenominate a 1-year payable, you need to calculate the future value =12. From the perspective of a corporate CFO, when hedging a payable versus a receivable
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13. A Japanese EXPORTER has a €1,000,000 receivable due in one year.Detail a strategy using options that will eliminate exchange rate risk.
14. A Japanese IMPORTER has a €1,000,000 PAYABLE due in one year.The one-year risk free rates are i\$= 4.03%; i= 6.05%; and i= 1%. Detail a strategy using forward contracts that will hedge his exchange rate risk. Have an estimate of how many contractsof what type.
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15. 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 optionB. The seller has given the buyer an at-the-money call optionC.Both a) and b) are correctD. 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).