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Final- Practice Exam without Solutions .doc

5 Pages
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Department
Economics and Finance
Course Code
EFB312
Professor
All

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Description
1QUESTION 1aShould a company hedge its foreign exchange exposure Explain reasons for and against hedging 4 MARKSbGold Coast Hotel Company has both revenues and costs set in Australian dollars but still finds that its profits fluctuate with the value of the Australian dollar It thinks that this has something to do with its high number of international guests Does the company have an exposure to will be hurt by an appreciation or depreciation of the Australian dollar relative to other currencies What could the company do to offset this exposure3 MARKSQUESTION 2DKNY owes Ptas 70 million in 30 days for a recent shipment of Spanish textiles It faces the following interest and exchange ratesSpot ratePtas 130Forward rate 30 daysPtas 13130day put option on dollars at Ptas 1291 premium30day call option on dollars at Ptas 1313 premiumUS dollar 30day interest rate annualized75Peseta 30day interest rate annualized15a What is the hedged cost of DKNYs payable using a forward market hedge2 MARKS
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