Take Test: FIN178-Final Exam × e Finance question lChegg.comx C secure https://b
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Take Test: FIN178-Final Exam × e Finance question lChegg.comx C secure https://blackboard learn fresnostate.edu/webapps/assessment/take/launch.jsp?course assessmentid- 73615J&coursed-; 66904J&content; id=19. a ) e ::: Apps G Google YouTube y twitter Blackboard Learn p Hotmail M Gmail Remaining Time: 1 hour, 39 minutes, 02 seconds Question Completion Status: What is the forward rate (ES) in one year based on international party conditio S1.1826/ 0.8566 $1.1674/E $0.8456/ a. b. c. QUESTION 6 10 points Save Answer DAX), which is estimated to beE7.5 million in one year. Current spot rate: SoS/E = A US company expects to pay an obligation fluctuating based on thc Deutsche Boerse AG German Stock Index DAX $1.1750/E: Interest rate is 0.75% in US and 0.1% in UK. You are asked to using the tools learned from FIN178 to hedge the currency risk for the company. How do you plan to hedge the currency risk? Short Euro and buy Euro call option Ob. Long Euro and buy Euro put option Short Euro and buy Euro put option Od.Long Euro and buy Euro call option a. C. QUESTION 7 10 points Save Answer Which one do you normally choose to hedge long-term, repeated exposures to currency risk, especially involving the trade of a fixed interest rate in one currency for a floating rate in another? OptionsExplanation / Answer
The inflation in US is 0.75% and in UK its 0.1
Thus the inflation in US s much higer than in UK and thus the Euro will appreciate.
As the company has to make payment in Euro being a US company they need to protect themselves from the increase in EURO prices.
Option d. Long EURO and buy EURO call option
As the market is expeting the prices of EURO to increase and thus it needs to take a bullish stanceon EURO by buying call and long EURO
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