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We have 100 million South African rand that is payable in one year (we have to pay it to a South African company.) 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, either calls or 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.
An economy produces only agricultural products (x) and manufactured goods (y). A quarter of the land in the country is arid and not suitable for agricultural products. Therefore, if half of the arid land is not used at all:
A welfare recipient can receive food stamps as well as cash welfare benefits. If the food stamp allotment is set as follows, How high can wages rise before all food stamps are eliminated? If the welfare formula in Problem 1 applies, what is the combi..
Analyze graphically the AD-AS model, the Keynesian cross, and the IS-LM model. Identify all relevant curves and causes for shifts in the curves. Explain the evolution of the monetarist and new classical theories.
If oligopolists compete hard against each other.
If Y is a continuous, uniformly distributed random variable over the interval (4,10), then the value of the PDF between 4 and 10 is: (
Discount Mart, Inc., files a suit in a state court against Elements Computer Corporation, alleging that Elements breached a contract to sell 500 notebook computers to Discount. During the course of the suit. Discount files a motion for judgment on th..
If the marginal product per dollar of capital is $2, the marginal product of labor is 20, the price of labor is $10 and the marginal product of land is 32, what is the price of land?
1.The debate over the appropriate role of government in education began centuries ago and continues unabated to date. Explain briefly some of the arguments for
Suppose that a firm’s long-run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing
Analyze the following ideas graphically and explain any fallacies that may be stated. An increase in demand will cause price to rise, with a rise in price, supply will increase and the increase in supply will push price down. Therefore, an increase i..
This question deals discusses issues in three different areas of the international monetary system. The GOLD STANDARD period was roughly 1870 to 1914. The gold standard has some strong automatic mechanisms that lead to 8 in a long run sense) simultan..
What is the probability that one customer or two customers in the sample are not satisfied with the service received (three decimal places)?
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