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Please answer all of the following questions as best as possible and make sure you show all work,

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Please answer all of the following questions as best as possible and make sure you show all work;clearly and in order, if you want to get full credit. I take o points if I cannot see how you arrived;at your answer even if your nal answer is correct.;Be clear and to the point in your answers. I will take points o for rambling and for incorrect or;irrelevant statements.;Partial credit will be awarded when it is deserved. If you have any questions please see me immediately.;You are required to work on the questions individually and turn in your own solutions.;This assignment is due on Tuesday, November 11, 2014 at the beginning of class. Late assignments will not be accepted.;Handwritten solutions must be neat and legible. Question values are in parentheses.;Page 1 of 7;2;Questions;1. Suppose an American rm is scheduled to pay 500,000 next month to a British company and is;willing to hedge the transaction risk by using futures market.;(a) (5 points) Determine whether this rm should sell or buy futures contracts?;(b) (10 points) Assume the futures settle price is $1.3232/, the initial margin is $2,000, and the;maintenance margin is $1,500. If the exchange rate evolves as shown in the following table, ll;out the rest of the table. Show all your work.;Day

 

Paper#25850 | Written in 18-Jul-2015

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