Use the following information for the next 8 questions. UCD (U.S. based MNC) will receive 250,000 euros in one year. The spot exchange rate today is $1.20 per euro. It observes that 1. The one-year interest rate for euros is 8%, and the one-year interest rate for U.S. dollars is 3%. 2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.18 per euro, and a premium of $0.02 per euro. 3. In the forward market, the one-year forward rate exhibits a 5% discount from the current spot exchange rate.   3 How many U.S. dollars will UCD end up receiving for its 250,000 euro receivable by using money market hedge

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Use the following information for the next 8 questions.

UCD (U.S. based MNC) will receive 250,000 euros in one year. The spot exchange rate today is $1.20 per euro. It observes that
1. The one-year interest rate for euros is 8%, and the one-year interest rate for U.S. dollars is 3%.
2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.18 per euro, and a premium of $0.02 per euro.
3. In the forward market, the one-year forward rate exhibits a 5% discount from the current spot exchange rate.

 

3 How many U.S. dollars will UCD end up receiving for its 250,000 euro receivable by using money market hedge?

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