Anticipate foreign currency inflow

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Reference no: EM131845239

1. A US firm expects receivables of E125,000 in three months. The US firm purchases a put option on the euros. The strike piece is $1.38/E and the premium is $.05/E. what is the net dollar amount received from the euro receivable if the spot rate in three months is $1.40/E ?

$172,500

$175,000

$166,225

$168,750

2. Assume that the US experiences a significant decline in income, while Japan’s income steady. This event should place_____ pressure on the value of the Japanese yen, other things being equal. (Assume that interest rates and other factors are not affected)

Upward and downward (offsetting)

Downward

Upward

3. If you execute a carry trade and the currency in which you borrow appreciates by more than the interest rate differential, the carry trade will not be profitable ?

Ture

False

4. If you anticipate a foreign currency inflow in 6 months, you worry about the foreign currency ________ between now and 6 months from now?

-Depreciating

-Appreciating

Reference no: EM131845239

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