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a US. company, sold equipment to a French company for Euro 100 million. Payment is due in 90 days. Answer the following questions (24-26) using the information below: Current spot rate 90 day Forward rate $.95/E $.98/E Interest rate in U.S Interest rate in France 6% PA. 896 PA. Call option Strike price Premium S.97/E 3% Put option Strike price Premium $.97/E 496 24. If a firm uses a money market hedge, how much money should the firm get in 3 months? a. less than $90 million b. between $90 million and $94 million c. between $94 million and $95 million d. over $95 million 25. If the US. firm uses an option to hedge this problem it should use a- The number associated with this hedge alternative represents_ a. call, the minimum the firm will receive b. call, the most the firm will pay c. put, the minimum the firm will receive d. put, the most the firm will pay. 26. What hedging alternative would net (including initial costs, if any) the most money if the exchange rate turned out to be $1.O/E in 90 days? a. forward market hedge b. money market hedge c. call option d. put option
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