Hedging with Put Options As treasurer of Tucson Corp. (a U.S. exporter to New Zealand), you must decide how to hedge (if at all) future receivables of 250,000 New Zealand dollars 90 days from now. Put options are available for a premium of $0.03 per unit and an exercise price of $0.49 per New Zealand dollar. The forecasted spot rate of the NZS in 90 days follows: Given that you hedge your position with options, create a probability distribution for U.S. dollars to be received in 90 days.

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 11, Problem 19QA
Textbook Problem

Hedging with Put Options As treasurer of Tucson Corp. (a U.S. exporter to New Zealand), you must decide how to hedge (if at all) future receivables of 250,000 New Zealand dollars 90 days from now. Put options are available for a premium of $0.03 per unit and an exercise price of $0.49 per New Zealand dollar. The forecasted spot rate of the NZS in 90 days follows:

Chapter 11, Problem 19QA, Hedging with Put Options As treasurer of Tucson Corp. (a U.S. exporter to New Zealand), you must

Given that you hedge your position with options, create a probability distribution for U.S. dollars to be received in 90 days.

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