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What is the expusre called

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Reference no: EM132200333

DKNY owes Ptas 70 million in 30 days for a recent shipment of Spanish textiles.

It faces the following interest and exchange rates

spot rate _ ptas 130/$

forward rate = ptas 131 /$

30-day us intrest rate (annualized)=7.5%

30-day put option on $ (strike price = ptas 129/$ = 1% premium

30-day ptas intrest rate (annualized)=15%

30-day call option on $ (strike price = ptas 131/$ = 3%

from the above setiation answer the following :

1. Which company faces a foreign exchange expsure

2. What is the expusre called?

3. What are the available alternitives to manage that exposure (show the calculations)

4. What is the best alternative and why?

5. If dkny expect the 30-day spot rate to be ptas 134/$ , should it hedge the payable? ( justify your answer )(hint consider other factors)

Reference no: EM132200333

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