A Japanese EXPORTER Has a €1,000,000 Receivable Due in One

question 23

Multiple Choice

A Japanese EXPORTER has a €1,000,000 receivable due in one year. Detail a strategy using options that will eliminate exchange rate risk. $$\begin{array} { l l l l } \hline \text { Listed Options } & & & \\& \text { Strike } & \text { Puts } & \text { Calls } \\\hline \text { Euro } € 62,500 & \$ 1.25 = € 1.00 & \$ 0.0075 \text { per } € & \$ 0.01 \text { per } € \\\hline \text { Yen } ¥ 12,500,000 & \$ 1.00 = \pm 100 & \$ 0.0075 \text { per } ¥ 100 & \$ 0.01 \text { per } ¥ 100 \\\hline\end{array}$$

• A)Buy 16 put options on euro, sell 10 call options on yen.
• B)Buy 16 put options on euro, buy 10 call options on yen.
• C)Sell 16 call options on euro, buy 10 put options on yen.
• D)None of the above

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Definitions:

Sense of Smell

The ability to detect and interpret odors through receptors in the nose, technically known as olfaction.

Normal Speech

The ability to produce vocal sounds that are recognized by listeners within a given language community as coherent spoken language.

Vagus

Referring to the vagus nerve, the tenth cranial nerve, which innervates major organs, including the heart, lungs, and digestive tract.

Trigeminal

Pertaining to the trigeminal nerve, which is responsible for sensation in the face and motor functions such as biting and chewing.