1. A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (C$) receivable in 6 months. The premium is $.01 and the exercise price of the option is $.75. If the spot rate at maturity is $.85, what is the net amount received by the corporation if it acts rationally?
$74,000 b. $84,000 c. $75,000 d. $85,000
2. A U.S. corporation has purchased currency call options to hedge a 62,500 British pounds payable in 3 months. The premium is $.02 per unit and the exercise price of the option is $1.50. If the spot rate of the pound at maturity is $1.65, what is the total amount paid by the corporation if it acts rationally?
a. $101,875 b. $103,125 c. $104,375 d. $95,000 e. $93,750
3. Assess the impact on the U.S. stock market when the Federal Reserve increases the money supply, and whether or not you believe the impact is predictable.