Homework Answers
Intrinsic value = Stock price -Strike price
= 1.45 - 1.44 = .01 or 1 cent
Time value = Price - Intrinsic value
= 2.10 - 1 = 1.1
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Quiz Instructions 4 pts Question 1 Assume that the British pound is trading at a spot...
4 pts Question 4 Boeing just signed a contract to sell a Boeing 737 aircraft to...
4 pts Question 4 Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed 50 million which is payable in one year. The current spot exchange rate is $1.1/€ and the one-year forward rate is $1.20/€. The annual interest rate is 5.0 % in the U.S. and 2.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure....
4 pts Question 2 Boeing just signeda contract to sell a Boeing 737 aircraft to Air...
4 pts Question 2 Boeing just signeda contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €50 million which is payable in one year. Tbe current spot exchange rate is $1.1/€ and the one-year forward rate is $1.20/€. The annual interest rate is 5.0% in the U.S. and 2.0 % in France. Boeing is concerned with the volati le exchange rate between the dollar and the euro and would like to hedge exchange exposure....
Boeing just signed a contract to sell a Boeing 737 aircraft to British Airways and will...
Boeing just signed a contract to sell a Boeing 737 aircraft to British Airways and will receive £60 million in six months. The current spot exchange rate is $1.3800/£ and the six-month forward rate is $1.4000/£. Boeing can buy a six-month put option on the British pound with an exercise price of $1.3500/£ for a premium of $0.020/£. Currently, the six-month interest rate is 1.880 percent per annum in the United States and 0.700 percent per annum in the UK....
Suppose that the exchange rate (spot price) of Euro in GBP (British Pound) is GBP 0.95. &nbs...
Suppose that the exchange rate (spot price) of Euro in GBP (British Pound) is GBP 0.95. In addition, assume that you can freely borrow and lend in GBP for any maturity at a rate of 2% per annum and that you can do the same in Euro at a rate of 1% per annum. Both rates are continuously compounded rates. Given these assumptions: Compute the forward price (exchange rate) of the GBP in Euro for delivery of the GBP in...
1. Jennifer Magnussen, a currency trader for Chicago-based Black River Investments, uses the following futures quotes...
1. Jennifer Magnussen, a currency trader for Chicago-based Black River Investments, uses the following futures quotes on the British pound to speculate on the value of the British pound. British Pound Futures, US$/pound (CME) Contract = 62,500 pounds Open Maturity Open High Low Settle Change High Interest March 1.4246 1.4268 1.4214 1.4228 0.0032 1.4700 25,605 June 1.4164 1.4188 1.4146 1.4162 0.0030 1.4550 809 a) If Jennifer buys 3 March pound futures, and the spot rate at maturity is $1.4560/pound, what...
Suppose Boeing Corporation exported a Boeing 787 to British Airway and billed £20 million payable in...
Suppose Boeing Corporation exported a Boeing 787 to British Airway and billed £20 million payable in one year (i.e., Boeing has a £20 million receivable in one-year). The money market rates, foreign exchange rates, and option prices are given as follows: The U.S. one-year interest rate: 2% per annum The U.K. one-year interest rate: 3.5% per annum The spot exchange rate: $1.32/£ One-year forward rate: $1.2985/£ Call option: exercise rate: $1.31, premium: $0.015/£ Put option: exercise rate: $1.31, premium: $0.02/£...
Assume that on November 1, the spot rate of the British pound was $1.58 and the...
Assume that on November 1, the spot rate of the British pound was $1.58 and the price on a December futures contract was $1.59. If the spot rate by November 30 was $1.51, should you have purchased or sold a December futures contract in pounds on November 1?
4) Assume that Smith Corporation will receive 100,000 British pounds in 90 days. A call option...
4) Assume that Smith Corporation will receive 100,000 British pounds in 90 days. A call option exists on British pounds with an exercise price of $1.65, a 90-day expiration date, and a premium of $.03. A put option exists on British pounds, with an exercise price of $1.61, a 90-day expiration date, and a premium of $.02. Determine the amount of dollars it will receive, including the amount paid for the option premium if it purchases and exercises an option....
2. The three-month futures price for the British pound is $1.3160/£. You expect the spot price...
2. The three-month futures price for the British pound is $1.3160/£. You expect the spot price three months from today to be $1.3680/£. The British pound contract size is £62,500. a. If you decide to buy 68 British pound futures contracts, how much money do you need today as your initial investment other than the margin you need to post? b. If you have available $1.4 million to speculate in the futures market as a buyer, how many contracts can...
Question 1 ol s 2 Points You bought British pound call option at a premium of...
Question 1 ol s 2 Points You bought British pound call option at a premium of $0.11 per unit. The exercise price is $1.73. In three months (right before your option expires), you can buy British pounds for $1.53 per unit in the spot market. What will be your net profit? A. -$0.11 B. $0 OC. $0.09 D. $0.20
4 pts Question 4 Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed 50 million which is payable in one year. The current spot exchange rate is $1.1/€ and the one-year forward rate is $1.20/€. The annual interest rate is 5.0 % in the U.S. and 2.0% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure....
4 pts Question 2 Boeing just signeda contract to sell a Boeing 737 aircraft to Air France. Air France will be billed €50 million which is payable in one year. Tbe current spot exchange rate is $1.1/€ and the one-year forward rate is $1.20/€. The annual interest rate is 5.0% in the U.S. and 2.0 % in France. Boeing is concerned with the volati le exchange rate between the dollar and the euro and would like to hedge exchange exposure....
4) Assume that Smith Corporation will receive 100,000 British pounds in 90 days. A call option exists on British pounds with an exercise price of $1.65, a 90-day expiration date, and a premium of $.03. A put option exists on British pounds, with an exercise price of $1.61, a 90-day expiration date, and a premium of $.02. Determine the amount of dollars it will receive, including the amount paid for the option premium if it purchases and exercises an option....
2. The three-month futures price for the British pound is $1.3160/£. You expect the spot price three months from today to be $1.3680/£. The British pound contract size is £62,500. a. If you decide to buy 68 British pound futures contracts, how much money do you need today as your initial investment other than the margin you need to post? b. If you have available $1.4 million to speculate in the futures market as a buyer, how many contracts can...
Question 1 ol s 2 Points You bought British pound call option at a premium of $0.11 per unit. The exercise price is $1.73. In three months (right before your option expires), you can buy British pounds for $1.53 per unit in the spot market. What will be your net profit? A. -$0.11 B. $0 OC. $0.09 D. $0.20
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