QUESTION 4 You will receive 500,000 in a few months and you calculate that the...
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QUESTION 4 You will receive 500,000 in a few months and you calculate that the break-even exchange rate for you between the "forward hedge (forward contract)" and "option hedge (option contract)" is $/ 1.78. Which of the following is more profitable for you if the spot rate is $/ 1.80? O Forward contract (forward hedging) Option contract (option hedging) O Both option contract and the forward contact provide the same profit O None QUESTION 5 Your company will receive 1,250,000 in four months. When you calculate that the break-even interest rate that makes you indifferent between money market hedge and "forward contract (forward hedge)" you find that it is 3%. If the interest rate is 3.5%, then forward contract (forward hedge) is more profitable for you than the money market hedge. True O False QUESTION 6 A US company needs to pay 750,000 to a British company in UK 6 months later. If this US company chooses the option hedge then the company needs to be a buyer of a put option O True O False
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