Question

ACCOUNTS PAYABLE You import textile products from Britain and you agree that you will pay €1,000,000...

ACCOUNTS PAYABLE

You import textile products from Britain and you agree that you will pay €1,000,000 in six months from now.

Spot rate: $1.220/€

Forward Information: 6-month forward rate is $1.240/€.

Option Information:

Strike Price: $1.23/€

Premium: 1% of the current spot rate (for one foreign currency)

Money Market Information

Money market information

US

UK

Borrowing rate, APR, compounded semiannually

4.0%

5.0%

Investing (lending) rate, APR, compounded semiannually

3.0%

4.5%

Buy or Sell Euro Foward?

How do you Hedge?

Which Option Buy or Put?

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