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Instruction 9.2: Use the Information for Following Problem(s)

question 1

Multiple Choice

Instruction 9.2:
Use the information for following problem(s) .
Oregon Transportation Inc. (OTI) has just signed a contract to purchase light rail cars from a manufacturer in Germany for euro 2,500,000. The purchase was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in euros rather than dollars, OTI is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information.
∙ The spot exchange rate is $1.40/euro
∙ The six month forward rate is $1.38/euro
∙ OTI's cost of capital is 11%
∙ The Euro zone 6-month borrowing rate is 9% (or 4.5% for 6 months)
∙ The Euro zone 6-month lending rate is 7% (or 3.5% for 6 months)
∙ The U.S. 6-month borrowing rate is 8% (or 4% for 6 months)
∙ The U.S. 6-month lending rate is 6% (or 3% for 6 months)
∙ December call options for euro 625,000; strike price $1.42, premium price is 1.5%
∙ OTI's forecast for 6-month spot rates is $1.43/euro
∙ The budget rate, or the highest acceptable purchase price for this project, is
$3,625,000 or $1.45/euro
-Refer to Instruction 9.2. What is the cost of a call option hedge for OTI's euro receivable contract? (Note: Calculate the cost in future value dollars and assume the firm's cost of capital as the appropriate interest rate for calculating future values.)

Identify the sources of information used by consumers and their impact on the decision-making process.

Understand the steps of the consumer decision process model.

Understand the concept of aligning actions and their role in social interactions.

Differentiate between types of aligning actions with examples.

Definitions:

Hormone Levels

The concentration of hormones in the bloodstream, which can influence mood, growth, metabolism, and reproductive processes.

Twin Study

A research method in psychology that compares the resemblance between identical and fraternal twins to estimate the genetic and environmental influences on traits.

High Fertility

a demographic term signifying a high rate of births within a population, often measured by the number of live births per thousand people per year.

Epigenetics

Investigating the differences in organisms that stem from the alteration of gene expression levels rather than changes in the genetic sequence.