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5. A US company has land in Paris that will likely be sold in the next year. There are two possible states of the world. With a probability 65% the exchange rate will be $1.2083/. In this case the land will be worth 150,000. With a probability 35% the exhange rate will be $1.3050/and the land will be worth 156,000. How would you use financial hedging to hedge this exposure? (a) Sell 230,972 forward (b) Buy 150,000 forward (c) Sell 156,000 forward (d) Buy 226,352 forward (e) None of the above 6. A US company has land in Acapulco that will likely be sold in the next year. There are two possible states of the world. With a probability 50% the exchange rate will be $0.2600/P. In this case the land will be worth P 10,000,000. With a probability 50% the exhange rate will be $0.2808/P and the land will be worth P 9,111,111. How would you use financial hedging to hedge this exposure? (a) Buy P 2,000,000 forward (b) Buy P 10,000,000 forward (c) Sell P 9,111,111 forward (d) Sell P 1,960,000 forward (e) None of the above 7. A US company has land in Toronto that will likely be sold in the next year. There are two possible states of the world. With a probability 50% the exchange rate will be $1.1000/C$. In this case the land will be worth C$450,000. With a probability 50% the ex hange rate will be $1.1220 C$ and the land will be worth C$454,500. How would you use financial hedging to hedge this exposure? (a) Sell C$679,500 forward (b) Buy C$450,000 forward (c) Sell C$ 454,500 forward (d) Buy C$665,910 forward (e) None of the above

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