C
FIN4802
Assignment 1 2026
Unique number:
Due Date: 21 May 2026
QUESTION 1
(a) Money market hedge
Present value of the euros to be received
= 1,000,000 ÷ 1.06
= 943,396.23 euros
Value in Dollars at the spot rate
= 943,396.23 × 1.20
= 1,132,075.47 dollars
Invest in the US at 8% Terms of use
By making use of this document you agree to:
Use this document as a guide for learning, comparison and reference purpose,
Terms of use
Not to duplicate, reproduce and/or misrepresent the contents of this document as your own work,
By making
Fully accept the consequences should use ofor
you plagiarise this document
misuse you agree to:
this document.
Use this document solely as a guide for learning, reference, and comparison purposes,
Ensure originality of your own work, and fully accept the consequences should you plagiarise or misuse this document.
Comply with all relevant standards, guidelines, regulations, and legislation governing academic and written work.
Disclaimer
Great care has been taken in the preparation of this document; however, the contents are provided "as is" without any express or
implied representations or warranties. The author accepts no responsibility or liability for any actions taken based on the
information contained within this document. This document is intended solely for comparison, research, and reference purposes.
, +27 81 278 3372
QUESTION 1
(a) Money market hedge
Present value of the euros to be received
= 1,000,000 ÷ 1.06
= 943,396.23 euros
Value in Dollars at the spot rate
= 943,396.23 × 1.20
= 1,132,075.47 dollars
Invest in the US at 8%
= 1,132,075.47 × 1.08
= 1,222,641.51 dollars
(b) Put option hedge
Since the expected future spot rate (1.22) is lower than the exercise price (1.23), the option will be
exercised.
Dollar proceeds from selling euros
= 1,000,000 × 1.23
= 1,230,000
Disclaimer
Great care has been taken in the preparation of this document; however, the contents are provided "as is"
without any express or implied representations or warranties. The author accepts no responsibility or
liability for any actions taken based on the information contained within this document. This document is
intended solely for comparison, research, and reference purposes. Reproduction, resale, or transmission
FIN4802
Assignment 1 2026
Unique number:
Due Date: 21 May 2026
QUESTION 1
(a) Money market hedge
Present value of the euros to be received
= 1,000,000 ÷ 1.06
= 943,396.23 euros
Value in Dollars at the spot rate
= 943,396.23 × 1.20
= 1,132,075.47 dollars
Invest in the US at 8% Terms of use
By making use of this document you agree to:
Use this document as a guide for learning, comparison and reference purpose,
Terms of use
Not to duplicate, reproduce and/or misrepresent the contents of this document as your own work,
By making
Fully accept the consequences should use ofor
you plagiarise this document
misuse you agree to:
this document.
Use this document solely as a guide for learning, reference, and comparison purposes,
Ensure originality of your own work, and fully accept the consequences should you plagiarise or misuse this document.
Comply with all relevant standards, guidelines, regulations, and legislation governing academic and written work.
Disclaimer
Great care has been taken in the preparation of this document; however, the contents are provided "as is" without any express or
implied representations or warranties. The author accepts no responsibility or liability for any actions taken based on the
information contained within this document. This document is intended solely for comparison, research, and reference purposes.
, +27 81 278 3372
QUESTION 1
(a) Money market hedge
Present value of the euros to be received
= 1,000,000 ÷ 1.06
= 943,396.23 euros
Value in Dollars at the spot rate
= 943,396.23 × 1.20
= 1,132,075.47 dollars
Invest in the US at 8%
= 1,132,075.47 × 1.08
= 1,222,641.51 dollars
(b) Put option hedge
Since the expected future spot rate (1.22) is lower than the exercise price (1.23), the option will be
exercised.
Dollar proceeds from selling euros
= 1,000,000 × 1.23
= 1,230,000
Disclaimer
Great care has been taken in the preparation of this document; however, the contents are provided "as is"
without any express or implied representations or warranties. The author accepts no responsibility or
liability for any actions taken based on the information contained within this document. This document is
intended solely for comparison, research, and reference purposes. Reproduction, resale, or transmission
