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Business, 14.04.2020 23:02 cherokeesiouxw72

Your firm, which is based in the US, has a €10,000 payable due in 1 year. You are considering hedging against FX risk by purchasing a call option with an exercise price of $1.05/€ and a premium of $0.03/€. The current one-year forward rate is €0.98/$, and the one-year US interest rate is 1.5%. If the forward rate is best predictor of the future spot rate, the firm to exercise its option given the information available to it at t=0.

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