13.08.2021

*B. We have 100 million South African rand that is payable in one year (we have to pay it to a South African company from whom we imported.) Assume the spot exchange rate is 10.05 rand equal one US dollar. Also, assume that the forward exchange rate is 10 rand equal one dollar. We expect the future spot rate to be 9.8 rand per $1. Furthermore, calls cost .03( 3%) and puts cost .01(1%). The exercise price of the options is 10 rand per dollar and 11 rand per dollar for both types of options.
Expound on how to hedge the aforementioned exposure. Moreover, the market expectation is that the rand will appreciate against the dollar. We want to implement transactions exposure hedging.
Ascertain that we use 1) a forward contract, or an options approach.

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02.12.2022, solved by verified expert
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Answer:

Answer shown below.

Step-by-step explanation:

1. Forward contract hedge.

Computation of cash outflow in $ .

*B. We have 100 million South African rand that, №15254033, 13.08.2021 02:50

2. Options hedging.

Since rands are required to be purchased and option is available in terms of" rand per $" , hence Put option is relevant.

Computation of cash outflow under options.

*B. We have 100 million South African rand that, №15254033, 13.08.2021 02:50

1. Cash outflow in $ under forward contract option  = $ 10000000

2. Cash outflow in $ under options hedge 

= $ 9099955

Cash outflow in $ is less in options hedging as compared to forward contract.

Hence, hedging should be preferred due to lower cash outflows.

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Mathematics
Step-by-step answer
P Answered by PhD

SI=(P*R*T)/100

P=2000

R=1.5

T=6

SI=(2000*1.5*6)/100

=(2000*9)/100

=180

Neil will earn interest of 180

Mathematics
Step-by-step answer
P Answered by PhD

Cost of 7 gallons=$24.50

Cost of 1 gallon=24.50/7=3.5

Cost of 15 gallons=15*3.5=52.5

Cost of 15 gallons will be $52.5

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Step-by-step answer
P Answered by PhD

For 1 flavor there are 9 topping

Therefore, for 5 different flavors there will be 5*9 choices

No of choices= 5*9

=45 

Mathematics
Step-by-step answer
P Answered by PhD

For every 8 cars there are 7 trucks

Therefore,

Cars:Truck=8:7

Answer is B)8:7

Mathematics
Step-by-step answer
P Answered by PhD

The solution is in the following image

The solution is in the following image
Mathematics
Step-by-step answer
P Answered by PhD

y=2x+15

where y=Value of coin

x=Age in years

Value of coin after 19 years=2*19+15

=$53

Therefore, Value after 19 years=$53

Mathematics
Step-by-step answer
P Answered by PhD

F=ma

where F=force

m=mass

a=acceleration

Here,

F=4300

a=3.3m/s2

m=F/a

    =4300/3.3

    =1303.03kg

Mathematics
Step-by-step answer
P Answered by PhD

F=ma

where F=force

m=mass

a=acceleration

Here,

F=4300

a=3.3m/s2

m=F/a

    =4300/3.3

    =1303.03kg

Approximately it is aqual to 1300kg

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