1. P&G corporation has purchased currency call options to hedge a 66,500 euro payable. The premium is $.05 (per unit of euro) and the exercise price of the option is $1.55. If the spot rate at the time of maturity is $1.51, what is the total amount paid by the corporation if it acts rationally(after accounting for the premium paid)?
$104,000
$100,000
$103,740
$102,400
$101,415
2. A share of the ADR of a German firm represents six share of that firm's stock that is traded on a German stock exchange. The share price of the firm was 20 euros when the German market closed. As the U.S. market opens, the euro is worth $1.34; what is the no arbitrage price of the share of the ADR?
$26.80.
$160.80.
$108.75.
$21.75.