Sign the currency options contract

Assignment Help Financial Management

Reference no: EM131567809

You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$.

Information for Forward Contract:

Forward exchange rate (one yr): 1.54 $/BP

Information for Money Market Instruments (MMI):

Current exchange rate: 1.50 $/BP

Investment return at Aerion Fund Management (in UK): 4% annual

Interest rate of borrowing from Bank of America (in USA): 2% annual

Information you need for Currency Options Contract:

Options premium: 0.015 $/BP

Interest rate of borrowing from Bank of America (USA): 2% annual

Allowed to exercise options at 1.54 $/BP

How much would you pay to Bank of America ONE YEAR from now in order to sign the Currency Options Contract?

Reference no: EM131567809

Questions Cloud

Project has an initial cost and expected net cash inflows : A project has an initial cost of $46,975, expected net cash inflows of $12,000 per year for 12 years, and a cost of capital of 8%. What is the project's NPV?

Equity plan and levered plan : Galaxy production is comparing two different capital structures and all equity plan (plan I) and a levered plan (plan II).

Identify the issues-barry has chronic back problem : Identify the issues: barry has a chronic back problem that requires that he receives regular payment therapy in a swimming pool.

Planning on issuing common stock for the first time : Facebook is planning on issuing common stock for the first time and you are considering buying its stock.

Sign the currency options contract : How much would you pay to Bank of America ONE YEAR from now in order to sign the Currency Options Contract?

What are the portfolio weights for each stock : You want to create portfolio with a beta of 1.6 by investing in US Steel Corp (X) and Qualcomm, Inc. what are the portfolio weights for each stock?

The bank accounts are federally insured : Assume annual compounding. Also assume that the bank accounts are federally insured, so that there is no risk of loss.

Difference in maturity risk premium on two securities : What is the difference in the maturity risk premiums (MRPs) on the two securities; that is, what is MRP5 - MRP3?

Stock today based on the discounted dividend model : Wyoming Mining Group stock does not now pay dividends. What is the value of this stock today based on the discounted dividend model?

User Account

All Pages