# Suppose that the exchange rate is 125 100 options

• Test Prep
• 107
• 89% (98) 87 out of 98 people found this document helpful

This preview shows page 41 - 43 out of 107 pages.

##### We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
The document you are viewing contains questions related to this textbook.
Chapter 18 / Exercise 1A
Fundamentals of Financial Management
Brigham
Expert Verified
71. Suppose that the exchange rate is €1.25 = £1.00. Options (calls and puts) are available on the Philadelphia exchange in units of €10,000 with strike prices of \$1.60/€1.00. Options (calls and puts) are available on the Philadelphia exchange in units of £10,000 with strike prices of \$2.00/£1.00. For a U.S. firm to hedge a €100,000 payable, A. buy 10 call options on the euro with a strike in dollars. B. buy 8 put options on the pound with a strike in dollars. C. sell 10 call options on the euro with a strike in dollars. D. sell 8 put options on the pound with a strike in dollars. E. both a) and b) F. both c) and d)
72. Suppose that the exchange rate is €1.25 = £1.00. Options (calls and puts) are available on the Philadelphia exchange in units of €10,000 with strike prices of \$1.60/€1.00. Options (calls and puts) are available on the Philadelphia exchange in units of £10,000 with strike prices of \$2.00/£1.00. For a U.S. firm to hedge a €100,000 receivable,
73. Suppose that \$2 = £1, \$1.60 = €1, and the cross exchange rate is €1.25 = £1.00. If you own a call option on £10,000 with a strike price of \$1.50, you would exercise this option at maturity if
8-41
##### We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
The document you are viewing contains questions related to this textbook.
Chapter 18 / Exercise 1A
Fundamentals of Financial Management
Brigham
Expert Verified
Chapter 08 - Management of Transaction Exposure 74. 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 an Italian firm to hedge a £100,000 payable,
75. 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 French firm to hedge a £100,000 receivable, A. buy 10 call options on the pound with a strike in euro. B. buy 8 put options on the pound with a strike in euro. C. buy 10 put options on the pound with a strike in euro. D. buy 8 call options on the euro with a strike in pounds. E. both a) and b) F. both c) and d)