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Questions 23-36 are based on the following information: Transaction Exposure Problem: (34 points in total) Suppose that you (i.e., company XYZ) are a US-based importer of goods from Canada. You expect the value of the Canada dollar to increase against the US dollar over the next 6 months. You will be making payment on a shipment of imported goods (CAD100,000) in 6 months and want to hedge your currency exposure. The US risk-free rate is 5% and the Canada risk-free rate is 4% per year. The current spot rate is $1.25/CAD, and the 6-month forward rate is $1.3/CAD. You can also buy a 6-month option on Canadian dollars at the strike price of $1.4 /CAD for a premium of $0.10/CAD. If XYZ uses MMH, the guaranteed dollar cost today should be $ [l1] .(please leave 2 decimal points for your answer. Example: 123.23)

Questions 23-36 are based on the following information: Transaction Exposure Problem: (34 points in total) Suppose that you (i.e., company XYZ) are a US-based importer of goods from Canada. You expect the value of the Canada dollar to increase against the US dollar over the next 6 months. You will be making payment on a shipment of imported goods (CAD100,000) in 6 months and want to hedge your currency exposure. The US risk-free rate is 5% and the Canada risk-free rate is 4% per year. The current spot rate is $1.25/CAD, and the 6-month forward rate is $1.3/CAD. You can also buy a 6-month option on Canadian dollars at the strike price of $1.4 /CAD for a premium of $0.10/CAD. This is an _________ case for XYZ.  

Questions 37-40 are based on the following information: (15 points in total) A U.S. firm holds an asset in UK and considers selling it in one year. The firm faces the following scenario of the future spot rates in one year:   State 1 State 2 State 3 State 4 State 5 Probability 20% 20% 20% 20% 20% Spot rate ($/£) 1.6 1.5 1.4 1.3 1.2 P*(£) 1200 1400 1600 1800 2000 P ($) $1920 $2100 $2240 $2340 $2400 In the above table, P* is the pound price (local price) of the asset in UK held by the U.S. firm and P is the dollar price of the asset. The variance of the dollar price of this asset if the U.S. firm remains unhedged against this exposure is [l1] .  

 In Aspen Skiing Company case, the strong dollar in 80s had a _______ effect on the competitive position of Aspen Skiing Company.

GE Transportation just sold locomotives to a Chinese importer. The payment of $80 million is due in six months, then

Questions 23-36 are based on the following information: Transaction Exposure Problem: (34 points in total) Suppose that you (i.e., company XYZ) are a US-based importer of goods from Canada. You expect the value of the Canada dollar to increase against the US dollar over the next 6 months. You will be making payment on a shipment of imported goods (CAD100,000) in 6 months and want to hedge your currency exposure. The US risk-free rate is 5% and the Canada risk-free rate is 4% per year. The current spot rate is $1.25/CAD, and the 6-month forward rate is $1.3/CAD. You can also buy a 6-month option on Canadian dollars at the strike price of $1.4 /CAD for a premium of $0.10/CAD. If XYZ wants to hedge the transaction exposure using option hedge, XYZ should ______________.

 An international trader faced with exposure to a depreciating foreign currency can reduce transaction exposure with a strategy of 

Boeing just signed a contract to sell 100 airplanes to China Airlines over the next 20 years, and the payment of CNY 100 million is due December 31 of each year. Boeing can best hedge the foreign currency risk by using which product?

Which of the following foreign exchange exposure will a local Erie firm (transactions in USD) most likely face? 

 XYZ Corporation, located in the United States, has an accounts payable obligation of ¥750 million payable in one year to a bank in Tokyo. Which of the following is NOT part of a money market hedge?