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FIN4802 Assignment 1 (662810) |ANSWERS| - DUE 21 MAY 2026

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FIN4802 Assignment 1 (662810) |ANSWERS| - DUE 21 MAY 2026 100% COMPLETE ANSWERS

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FIN4802
Assignment 1

(662810)
DUE: 21 MAY 2026

, UNIVERSITY OF SOUTH AFRICA

FIN4802 – International Financial Management

Assignment 01 | 2026

Unique Number: 662810 | Due Date: 21 May 2026




QUESTION 1 (10 marks)

Scenario: Jones Corp. (U.S. firm) expects to receive €1,000,000 in 1 year.



Parameter Value

Spot rate (EUR/USD) $1.20

1-year forward rate (EUR/USD) $1.21

Expected spot rate in 1 year $1.22

Put option exercise price $1.23

Put option premium $0.04 per unit

U.S. deposit rate 8%

U.S. borrowing rate 9%

Eurozone deposit rate 5%

Eurozone borrowing rate 6%



(a) Money Market Hedge [5 marks]

Since Jones Corp. is expecting to RECEIVE €1,000,000 in one year, the money market
hedge involves borrowing euros today (creating a euro liability that will be offset by the
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Jeff Madura, CHANDRASEKHAR International Financial Management with Student Resource Access 12 Months
Publisher: 2017 ISBN: 9780170386135 Edition: Unknown

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