FIN4802
Assignment 1 2026
Unique number:
Due Date: 21 April 2026
QUESTION 1
(a) Money market hedge
Present value of the euros to be received
= 1,000,000 ÷ 1.06
= 943,396.23 euros
Value in Dollars at the spot rate
= 943,396.23 × 1.20
= 1,132,075.47 dollars
DISCLAIMER & TERMS OF USE
Educational Aid: These study notes are intended to be used as educational resources and should not be seen as a
replacement for individual research, critical analysis, or professional consultation. Students are encouraged to perform
their own research and seek advice from their instructors or academic advisors for specific assignment guidelines.
Personal Responsibility: While every effort has been made to ensure the accuracy and reliability of the information in
these study notes, the seller does not guarantee the completeness or correctness of all content. The buyer is
responsible for verifying the accuracy of the information and exercising their own judgment when applying it to their
assignments.
Academic Integrity: It is essential for students to maintain academic integrity and follow their institution's policies
regarding plagiarism, citation, and referencing. These study notes should be used as learning tools and sources of
inspiration. Any direct reproduction of the content without proper citation and acknowledgment may be considered
academic misconduct.
Limited Liability: The seller shall not be liable for any direct or indirect damages, losses, or consequences arising from
the use of these notes. This includes, but is not limited to, poor academic performance, penalties, or any other negative
consequences resulting from the application or misuse of the information provided.
, For additional support +27 81 278 3372
QUESTION 1
(a) Money market hedge
Present value of the euros to be received
= 1,000,000 ÷ 1.06
= 943,396.23 euros
Value in Dollars at the spot rate
= 943,396.23 × 1.20
= 1,132,075.47 dollars
Invest in the US at 8%
= 1,132,075.47 × 1.08
= 1,222,641.51 dollars
(b) Put option hedge
Since the expected future spot rate (1.22) is lower than the exercise price (1.23), the
option will be exercised.
Dollar proceeds from selling euros
= 1,000,000 × 1.23
= 1,230,000
Assignment 1 2026
Unique number:
Due Date: 21 April 2026
QUESTION 1
(a) Money market hedge
Present value of the euros to be received
= 1,000,000 ÷ 1.06
= 943,396.23 euros
Value in Dollars at the spot rate
= 943,396.23 × 1.20
= 1,132,075.47 dollars
DISCLAIMER & TERMS OF USE
Educational Aid: These study notes are intended to be used as educational resources and should not be seen as a
replacement for individual research, critical analysis, or professional consultation. Students are encouraged to perform
their own research and seek advice from their instructors or academic advisors for specific assignment guidelines.
Personal Responsibility: While every effort has been made to ensure the accuracy and reliability of the information in
these study notes, the seller does not guarantee the completeness or correctness of all content. The buyer is
responsible for verifying the accuracy of the information and exercising their own judgment when applying it to their
assignments.
Academic Integrity: It is essential for students to maintain academic integrity and follow their institution's policies
regarding plagiarism, citation, and referencing. These study notes should be used as learning tools and sources of
inspiration. Any direct reproduction of the content without proper citation and acknowledgment may be considered
academic misconduct.
Limited Liability: The seller shall not be liable for any direct or indirect damages, losses, or consequences arising from
the use of these notes. This includes, but is not limited to, poor academic performance, penalties, or any other negative
consequences resulting from the application or misuse of the information provided.
, For additional support +27 81 278 3372
QUESTION 1
(a) Money market hedge
Present value of the euros to be received
= 1,000,000 ÷ 1.06
= 943,396.23 euros
Value in Dollars at the spot rate
= 943,396.23 × 1.20
= 1,132,075.47 dollars
Invest in the US at 8%
= 1,132,075.47 × 1.08
= 1,222,641.51 dollars
(b) Put option hedge
Since the expected future spot rate (1.22) is lower than the exercise price (1.23), the
option will be exercised.
Dollar proceeds from selling euros
= 1,000,000 × 1.23
= 1,230,000
