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What would be Kansas is net dollar cost for the payable

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Question - Kansas corporation an American company has a payment of €6.4 million. Due to Tuscany Corp. one year from today. At the prevailing spot rate of 0.90 €/$ this would cost Kansas $7,111,111 but Kansas faces the rest that the euro/ dollar rate would fall in the coming year so that it will end up paying a higher amount and dollar terms to hedge this risk Cancers has to possible strategies. Strategy one is to buy €6.4 million forward today at a one-year forward rate of 0.89 €/$. Strategy to use to pay a premium of $114,000 for a one year core option one €6.4 million and exchange rate of 0.88 €/$

Required -

A. Suppose that In one year despite exchange rate is 0.85 €/. What would be Kansas is net dollar cost for the payable under each strategy?

B. Suppose that in one year despite exchange rate is 0.95 €/. What would Kansas is net dollar cost fir the payable under each strategy?

Reference no: EM133018417

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