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How can the Sports Exports Company use currency options 1. How can the Sports Exports Company use currency futures contracts to hedge against exchange rate risk? Are there any limitations of using currency futures contracts that would prevent the Sports Exports Company from locking in a specific exchange rate at which it can sell all the pounds it expects to receive in each of the upcoming months? 2. How can the Sports Exports Compa ...

Other / Other 14 Apr 2016

Should Blades allow its yen position to be unhedged 1. If Blades uses call options to hedge its yen payables, should it use the call option with the exercise price of $0.00756 or the call option with the exercise price of $0.00792? Describe the tradeoff. 2. Should Blades allow its yen position to be unhedged ? Describe the tradeoff. Business Management Assignment Help, Business Management Homework help, Business Management Stud ...

Other / Other 14 Apr 2016

Estimating Profits from Currency Futures 1. Currency Strangles. The following information is currently available for Canadian dollar (C$) options (see Appendix B in this chapter): • Put option exercise price = $.75 • Put option premium = $.014 per unit • Call option exercise price = $.76 • Call option premium = $.01 per unit • One option contract represents C$50,000 a. What is the maximum possible gain ...

Other / Other 14 Apr 2016

Will the choice you made as to the optimal hedging strategy 1. Will the choice you made as to the optimal hedging strategy in question 4 definitely turn out to be the lowest-cost alternative in terms of actual costs incurred? Why or why not? 2. Now assume that you have determined that the historical standard deviation of the yen is about $0.0005. Based on your assessment, you believe it is highly unlikely that the future spot rate will ...

Other / Other 14 Apr 2016

Currency futures markets are commonly used as a means of capitalizing on shifts 1. Currency Straddles. Refer to the previous question, but assume that the call and put option premiums are $.035 per unit and $.025 per unit, respectively. (See Appendix B in this chapter.) c. Construct a contingency graph for a long pound straddle. d. Construct a contingency graph for a short pound straddle. 2. Risk of Currency Futures. Currency future ...

Other / Other 14 Apr 2016

Impact of Information on Currency Futures 1. Currency Strangles. For the following options available on Australian dollars (A$), construct a worksheet and contingency graph for a long strangle. Locate the break-even points for this strangle. (See Appendix B in this chapter.) • Put option strike price = $.67 • Call option strike price = $.65 • Put option premium = $.01 per unit • Call option premium = $.02 per u ...

Other / Other 14 Apr 2016

Assume that the firm shares the market consensus 1. Assume there are speculators who attempt to capitalize on their expectation of the yen’s movement over the two months between the order and delivery dates by either buying or selling yen futures now and buying or selling yen at the future spot rate. Given this information, what is the expectation on the order date of the yen spot rate by the delivery date? (Your answer should co ...

Other / Other 14 Apr 2016

The International Financial Environment The International Financial Environment Mesa Company specializes in the production of small fancy picture frames, which are exported from the U.S. to the United Kingdom. Mesa invoices the exports in pounds and converts the pounds to dollars when they are received. The British demand for these frames is positively related to economic conditions in the United Kingdom. Assume that British inflation ...

Other / Other 14 Apr 2016

Compare and contrast forward and futures 1. Forward versus Futures Contracts. Compare and contrast forward and futures contracts. 2. Currency Strangles. (See Appendix B in this chapter.) Assume the following options are currently available for British pounds (₤): • Call option premium on British pounds = $.04 per unit • Put option premium on British pounds = $.03 per unit • Call option strike price = $1.56 â ...

Other / Other 14 Apr 2016

How can a forward contract backfire 1. Effects of a Forward Contract. How can a forward contract backfire? 2. Price Movements of Currency Futures. Assume that on November 1, the spot rate of the British pound was $1.58 and the price on a December futures contract was $1.59. Assume that the pound depreciated during November so that by November 30 it was worth $1.51. a. What do you think happened to the futures price over the month of No ...

Other / Other 14 Apr 2016