Assume That Jones Co

question 48

Multiple Choice

Assume that Jones Co. will need to purchase 100,000 Singapore dollars (S$) in 180 days. Today's spot rate of the S$ is $.50, and the 180-day forward rate is $.53. A call option on S$ exists, with an exercise price of $.52, a premium of $.02, and a 180-day expiration date. A put option on S$ exists, with an exercise price of $.51, a premium of $.02, and a 180-day expiration date. Jones has developed the following probability distribution for the spot rate in 180 days: The probability that the forward hedge will result in a higher payment than the options hedge is ____ (include the amount paid for the premium when estimating the U.S. dollars required for the options hedge) .

• A) 0%
• B) 10%
• C) 30%
• D) 40%
• E) 70%

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Definitions:

Personal Appeals

Influencing tactics that leverage the personal relationship between the influencer and the target, often invoking loyalty or friendship.

Coalition Building

The process of creating alliances among diverse groups or individuals to work toward a common goal.

Commitment

An individual's psychological attachment to an organization, idea, or relationship, typically reflected in their willingness to persist through difficulties.

Compliance

The act of conforming to or following rules, standards, or laws.