How many call option contracts must be purchased by abc in , Ask an Expert

Management Studies

QUESTION

ABC Company is a US based corporation, it has ordered DM 625,000 of merchandise from a German supplier and the payment is due on the 21st of September 2010. Suppose that ABC may buy option contracts with a strike price of $0.60/DM and the expiration date is 21st September 2010 and selling at a premium of USD 0.0107. Each call option gives the holder the right to purchase DM 125,000

Required-

a) (1) How many call option contracts must be purchased by ABC in order to hedge against the currency risk of the payment of DM 625,000 on the 21st September 2010?

(2) How much will be paid to purchase the contracts?

b) (1) Suppose that on the 21st of September 2010, the spot rate is $ 0.625/DM
Will the call option be exercised?

(2) How much will it cost ABC to pay for its supply?

(3) How much will ABC save by exercising the options contracts?

c) (1) Suppose that on the 21st of September 2010, the spot rate is $ 0.70/DM
Will the call option be exercised?

(2) How much will the merchandise cost ABC?

d) (1) Suppose that on the 21st of September 2010, the spot rate is $ 0.575/DM
Will the call option be exercised?

(2) How much will be merchandise cost the ABC?

View complete question

Management Theories, Management Studies

Category:- Management Theories
Reference No.:- M9132560

Have any Question?Write your Review or question?

Related Questions in Management Theories

Firm a has been dealing in baby food products for the past

Firm A has been dealing in baby food products for the past 10 years and enjoys a good market share. Suppose a new firm enters the market to capitalize on the increasing demand for such products. However, the products of ...

Df or computer forensics cf laboratory and what actually

(DF) or computer forensics (CF) laboratory and what actually one would find in a lab. Trust me, there are many different artifacts surrounding the DF/CF lab. After you find the article, you are to write a short 1-2 repor ...

Questionthe class examined the joint commissions framework

Question: The class examined the Joint Commission's framework for root cause analysis of sentinel incidents in health care organizations. For purposes of this project, a critical incident is a key occurrence, but it is n ...

Identify a health technology or a specific aspect of a

Identify a health technology or a specific aspect of a payment system that is changing for your health care setting. Work as a team to prepare a PowerPoint presentation to educate and inform your co-workers about the rec ...

In chester barnards view an organisation can be efficient

In Chester Barnard's view, an organisation can be 'efficient' without being 'effective'. Discuss. Discuss your answer, with reference to the key relevant theoretical contributions and academic studies that were reviewed ...

Question 1supply chain management is instrumental as it

Question: 1. Supply chain management is instrumental as it pertains to marketing as marketing plays a key role in integrating supply chain processes and promoting collaboration between stakeholders. 2. In this week's dis ...

In this unit we learned about management organizational

In this unit, we learned about management, organizational structures, and open and closed systems. Write an essay in which you expand on the following topics: Describe management, organization, and leadership in relation ...

Assignment -for this assignment analyze and discuss your

Assignment - For this assignment, analyze and discuss your personal leadership style. Based on your experiences, current readings, work experience, education, and use of self-assessment instruments describe what you thin ...

Foundations of complexitycomplexity theory the field of

Foundations of Complexity Complexity theory, the field of study of complex systems, is a relatively recent theory. It is a broad theory encompassing nine research traditions-an aggregation of principles, concepts, theori ...

This case study relates to the firestone tyre company in

This case study relates to the Firestone Tyre Company in the United States in 2000, and refers to the now famous tyre recall that took place during August of that year. You have been provided with case study details in t ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Management Theories Expert