1 your us-based firm needs to make a chf 10000000 payment, Ask an Expert

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1. Your U.S.-based firm needs to make a CHF 10,000,000 payment to a Swiss supplier in 2 months. The spot exchange rate is CHF 0.9620/USD. Which of the following will be the best option to hedge the firm’s exchange rate risk?

A. Purchase a 2-month put option with a strike price of $1.0500 and a premium of $0.0152/CHF.

B. Purchase a 1-year call option with a strike price of $1.0650 and a premium of $0.0007/CHF.

C. Purchase a 2-month put option with a strike price of $1.0250 and a premium of $0.01852/CHF.

D. Purchase a 2-month call option with a strike price of $1.0500 and a premium of $0.0069/CHF.

2. A trusted friend told you that a cash flow sequence that started at $3000 in year 1 and increased by $2000 each year would be worth $15,000 in 12 years at a rate of return of 10% per year. Is she correct?

3. A widower currently has $107,500 yielding 8 percent annually. Can he withdraw $18,234 a year for the next ten years? If he cannot, what return must he earn in order to withdraw $18,234 annually?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92799922

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