Answer Happy

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Your firm
will have to pay CAD20,000,000 in the next 3 months.










You have
following information:

































Current spot rate of CAD1

$0.92































Call Option on CAD

















Exercise price

1.15















Premium per CAD

0.005






























Put
option on CAD

















Exercise price

1.03















Premium per CAD

0.007































Forward contract on CAD

















Bid

1.109















Ask

1.115































Future Contract on CAD

1.108


































































If the
exchange rate of CAD at the end of 3-month period is:



$1.0000

›







Looking back, meaning taking the exchange rate of
$1 at expiration date into account, which hedging method is the
best for you.


Find the
amount of USD will have to pay in this best case.