firm has sold an Italian firm 1,000,000 worth of product. In one year the U. firm gets paid. To hedge, the U. firm bought put options on the euro...

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 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

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firm has sold an Italian firm 1,000,000 worth of product. In one year the U. firm gets paid. To hedge, the U. firm bought put options on the euro...

  • Written in: 17-Oct-2019
  • Paper ID: 5936587
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DATE ANSWERED

Oct 17, 2019

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