You are a U. S.-based importer of bicycles and just bought competition-style bicycles for €100,000 from Italy. You owe €100,000 to the Italian supplier in one year. You are concerned about the number of dollars you will have to pay for this purchase in one year. Suppose:
- The spot exchange rate is $1.50/€
- The forward exchange rate is $1.25/€
- U. S. interest rate is 3.00% per annum
- The interest rate in Europe is 4.00% per annum
- Call option with a strike price of $1.30/€ is available with premium of $0.10/€
- Put option with a strike price of $1.30/€ is available with premium of $0.20/€
Round your answers to two decimal places.
a. Unhedged position: Suppose you decide not to do anything. In one year, spot rate happens to be $1.50/€. What will be the total dollar cost of this purchase then? What will be the total dollar cost if spot rate happens to be $1.30/€ in one year? Or $1.40/€? Are you subject to exchange rate risk in this case?
b. Forward market hedge: How can you lock in the exact dollar cost of this purchase by using forward contracts? Should you agree to buy or sell €100,000 forward in one year’s time? What will be the total dollar cost of this purchase with forward hedge? Are you subject to exchange rate risk in this case?
c. Money market hedge: How can you hedge using money market hedge? Where should you borrow and how much? What is the total dollar cost of this purchase? Are you
subject to exchange rate risk in this case?
d. Option market hedge: How can you hedge using options? Should you purchase put or call options on euros? What is the total premium today? When will you exercise your options and what will be the total dollar cost if you exercise? And when will you not exercise your options and what will be the total dollar cost then?
e. Comparing hedging methods: What are the break-even exchange rates between hedging methods? When do you prefer which hedging method?

Suppose either computers or televisions can be assembled with the following labor inputs: units produced 1 2 3 4 5 6 7 8 9 10 total labor used 3 7 12 18 25 33 42 54 70 90 (a) draw the production possibilities curve for an economy with 54 units of labor. label it p54. (b) what is the opportunity cost of the eighth computer? (c) suppose immigration brings in 36 more workers. redraw the production possibilities curve to reflect this added labor. label the new curve p90.

2. the external environment (connect)choose whether each example belongs in the general, task, or internal environment.exampleenvironmenta worldwide recession task environment / general environment / internal environmentlocal mothers asking their community grocery store to carry no-salt cheerios-type cereal for their babies task environment / general environment / internal environmentchoose the phrase that best completes the following sentence.the relationship between the task environment and the general environment is best described as: a one-way system: changes in the task environment affect the general environment, but changes in the general environment do not affect the task environment.an open system: changes in the task environment affect the general environment, and changes in the general environment affect the task environment.a one-way system: changes in the general environment affect the task environment, but changes in the task environment do not affect the general environment.a closed system: changes in the general environment do not affect the task environment, and changes in the task environment do not affect the general environment.©bloomberg via getty imagesmanagement in the newsin april 2010, the explosion of british petroleum’s (bp) deepwater horizon oil drilling rig and the accompanying oil spill dramatically changed the external environment in which all oil companies operate. the explosion released more oil than any other accidental spill in history and had a huge impact on the waters and surrounding communities of the gulf coast. the conditions that led to the spill, the attempts to stop the spill, and the clean-up and aftermath of the spill prompted debates in the u.s. senate, concern on wall street, and attention from companies all over the world.match each oil spill event with a specific dimension of the general environment.eventgeneral environment dimensionbp stock prices falling 25% during the first month after the oil spill oil seeping into pelican nesting grounds, which will place the brown pelican back on the endangered species list people moving from louisiana to oklahoma to avoid the effects of the spill

"consists of larger societal forces that affect how a company engages and serves its customers."