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Calculate fonterra cooperative expected value of nzd

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Reference no: EM132951568

a) A New Zealand Company Fonterra Cooperative also owes another USA exporter Alto Dairy Inc USD150,000, due in three months. The following information is available:

Current spot exchange rate (NZD/USD) 1.3819 - 1.3869
Expected spot exchange rate (NZD/USD) 1.3919 - 1.3969
Premium on USD 3 months Call option 1%
Premium on USD 3 months Put option 1%
Exercise exchange rate 1.3944

Time to expiry 3 months

i) Calculate Fonterra Cooperative expected value of NZD receivables under an option hedge.

ii) Calculate Fonterra Cooperative expected value of NZD receivables if no option hedge is taken.

Reference no: EM132951568

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