QUESTION B Forwards cary contracts; option selers have the right to decise wheth

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QUESTION B Forwards cary contracts; option selers have the right to decise whether to excise the option or not betione D.Forwards are cuntomined contracts, tutures are standardized QUESTION 10 Final Question wolaile portfolio of Auseraliam stocks which is expected to be sold in one year with a proceed of AUD 2 million. Current spot rabe SaS/AUD- 507630/ALD, Interest rate is0.39% in US lnd L00% in Australia. You are asked to using the tools learned from FINI178 to hedge the currency risk for the Forward: Please calculate the forward rate per the international parity condition Futures: Contract size AUD 100,000 and one year futures contract price is $ 0 7652/AUD Opton anta AUD po opaon (AUDUSD) Qades Exoreise price. SO76SOAUD, Cali premium. So o2 14 and Put premium: S 0.0250 Possible actual pst rate SiS/AUD in one year: S0.7530/AUD and 0.7730/AU company. Please specify your action plans and their results. D respectively. Based on the answers to other questioes, what is the best hedge tool for the company in this particular case? A Forwad O B.Futues C.Cumenoy Swap

Explanation / Answer

Answer:

D.

A forward contract is a customized contract between two parties to sell or buy an asset at a agreed price on a future date. and the option buyer have the right to decide whether to excise the option or not before expiration.

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