The Accounting Fraud At Worldcom Essay - 1349 Words

From the time of WorldCom’s inception there always seemed to be a tradition in management as if the company was only 100 or so employees. There was a â€Å"good old boys† mentality among the limited few running the company and if you were outside that circle then were told only what they wanted you to hear. An unspoken rule among employees was to do what you were told without questions or risk the consequences. One example of this situation occurred when senior management member Gene Morse told an employee â€Å"If you show those damn numbers to the f****ing auditors, I’ll throw you out the window† (Kaplan, R.S., Kiron, D., 2007, p. 3).WorldCom showed no concern regarding an employee’s need and obligation to voice concerns on matters related†¦show more content†¦P., Coulter, M. K., 2012, p. 152), although it seems none of WorldCom’s executive management team seemed to feel this way. Many steps could have been taken to prevent the collapse of the WorldCom empire, but only a few key managers held the power and none were willing to take action. One control that did not exist in WorldCom’s culture was allowing both internal and external auditors access to all necessary documents and statements. Without full disclosure of these items no one could see how many risks the company was taking by making fraudulent entries against their books. Also the external audit team, Arthur Anderson, held WorldCom as one of its best customers which was a major conflict of interest. This relationship lead to many fundamental mistakes from Anderson not keeping pressure on WorldCom and getting all vital information that would prove how poorly the company was being run. Had they been operating transparently, auditors and employees would have seen the accounting deception and could potentially have stopped it prior to the company’s collapse. In addition, by employing multiple auditing firms many of the mistakes being made may have been caught and discontinued from the beginning. Corporate Responsibility The lack of critical information making its way down the chain allowed WorldCom to continue its clouded disservice toShow MoreRelatedAccounting Fraud at Worldcom8726 Words   |  35 PagesROBERT S. KAPLAN DAVID KIRON Accounting Fraud at WorldCom WorldCom could not have failed as a result of the actions of a limited number of individuals. Rather, there was a broad breakdown of the system of internal controls, corporate governance and individual responsibility, all of which worked together to create a culture in which few persons took responsibility until it was too late. — Richard Thornburgh, former U.S. attorney general1 On July 21, 2002, WorldCom Group, a telecommunications companyRead MoreAccounting Fraud at Worldcom 21405 Words   |  6 PagesAccounting Fraud at WorldCom Vanessa Gail Woods Strayer University Connor-Green/ACC 576 March 21, 2010 Accounting Fraud at WorldCom The break up of ATT opened the long distance service market to small companies during the mid- to late-1980s and 1990s. Long Distance Discount Service (LDDS) opened in 1983 with moderate growth until its stock went public in 1989. CEO Bernie Ebbers decided to grow the organization through acquisitions (70 companies over the course of its lifetime)Read MoreAccounting Fraud at Worldcom 33346 Words   |  14 PagesAccounting Fraud at WorldCom 1) What are the pressures that lead executives and managers to â€Å"cook the books?† After the rapid evolution of the telecommunication industry in the 1990s, WorldCom shifted its strategy to focus on building revenues and acquiring capacity sufficient to handle expected growth. Their biggest goal was to be the No. 1 stock on Wall Street rather than capturing the market share. As a result, their Expense-to-Revenue (E/R) Ratio was their measurement for their main objectiveRead MoreThe Case About Accounting Fraud At Worldcom1964 Words   |  8 Pagesthe analysis of the case about Accounting Fraud at WorldCom Group member: Weichuan Xu Miao zhou 1. What are the pressures that lead executives and managers to cook the books? Firstly, one of the pressure is the company’s goal that was made by the top executive Ebbers. There is an economic recession and the bubble collapse which make the conditions deteriorate in 2012. He thinks that the company should focus on being the NO.1 stock on Wall street rather than the company’s really good operationRead MoreAssignment # 3 Worldcom Accounting Scandal1486 Words   |  6 PagesAssignment # 3 WorldCom Accounting Fraud By Mark A. Cowan Strayer University ACC 499- Accounting Capstone May 15, 2011 The purpose of this paper is to discuss the aspects of the WorldCom accounting scandal and the effects that this scandal had on the accounting world as we know it. We will discuss the corporate culture at WorldCom and how it contributed to the accounting fraud, how the CEO’s desire to be the #1 stock on Wall Street contributed to the fraud, pressures on accountants to bookRead MoreAccounting Scandal of Worldcom940 Words   |  4 PagesMANAGERIAL ACCOUNTING WORLDCOM How did it cook the books? Nguyen Bao Khanh Student ID: FB60162 Class: FB0662 May 19th, 2012 APENDIX 1. WorldCom’s accounting scandal 2. How did WORLDCOM cook its books? 3. Conclusion WORLDCOM headquarter in Virginia, USA. WORLDCOM’S ACCOUNTING SCANDAL WorldCom, established in 1983, whose CEO was Bernard Ebbers, was the second largest long distance phone company in the US after ATT. It could be seen as a pride of America until it got into oneRead MoreDo Big Companies Take So Much From Each Other?1328 Words   |  6 Pagessubsidiary of Verizon Communications. In the article World-Class Scandal At WorldCom by David Hancock he discusses how â€Å"The corporation was formed as a result of the fusion of WorldCom and MCI Communications corporations, and used the name MCI WorldCom for a while and was succeeded by the WorldCom Company, before changing its name on April 12, 2003, as part of the corporation s ending of their bankruptcy status.† WorldCom Inc. began as a small Mississippi telephone service provider of long distanceRead MoreWorldcom Failure1198 Words   |  5 PagesWorldCom Failure in relation to its Organizational Behavior LDR/531 - Organizational Leadership October 7, 2010 WorldCom Failure in relation to its Organizational Behavior INTRODUCTION Year 2002 saw an unprecedented number of corporate scandals: Enron, Tyco, Global Crossing, etc. In many ways, WorldCom is just another case of failed corporate governance, accounting abuses, and outright greed. Many people may question if there is a secret to operating a successful business in modern times.Read MoreWhy Do Big Companies Take So Much From Each Other?1330 Words   |  6 Pagessubsidiary of Verizon Communications. In the article World-Class Scandal At WorldCom by David Hancock he discusses how â€Å"The corporation was formed as a result of the fusion of WorldCom and MCI Communications corporations, and used the name MCI WorldCom for a while and was succeeded by the WorldCom Company, before changing its name on April 12, 2003, as part of the corporation s ending of their bankruptcy status.† WorldCom Inc. began as a small Mississippi telephone service provider of longRead MoreWorld Com Analysis1472 Words   |  6 Pagesexecutives and managers of WorldCom to cook the books. Acquisition of other companies drove WorldCom to spend beyond their means; managers were told to spend whatever was necessary to increase revenue, even if it meant that long-term costs would outweigh the short-term gains. This fiscally unhealthy mentality led to a very bad decision to enter into long-term fixed rate leases for network capacity with extensive punitive termination provisions. Once the market for WorldCom s services started to cool

Short Story Theme Of Eve In Darkness - 1344 Words

Trenton Brown Mrs. Washburn English 10 October 2017 Themes Short Story Title: Eve in Darkness Short Story Theme: The understanding of sin. I think the theme of this story is the understanding of sin. The author reveals this through actions and events in the story. The main character of the story has seen and experienced instances of sin. For example, she handled the snuff boxes which she had been forbidden to touch (Lass 19). This form of sin that she committed would be considered disobedience. Another example is when she had made fun of the paperboy and was told that he was less fortunate that she (Lass 19). She was not fully aware of her sinfulness until she was told what sin was and had really thought about it (Lass 23). Once she†¦show more content†¦The theme of this story in my opinion was showing kindness to others and receiving it in return. The author revealed this theme through the actions and events of Mr. Johnson. For example, Mr. Johnson had watched a woman’s child while she monitored the movers load up a moving truck with her furniture and other items (Lass). This showed Mr. Johnson willingness to sacrifice his own time to help another person. Another example is when a woman that was in a hurry bumps into Mr. Johnson accidentally on the way to her job because she was running late for work and Mr. Johnson offered to pay her the same wages that she would be paid at her job for one day’s work (Lass). In my opinion, he did not have to offer this to the woman but it was his kindnesses that lead him to do this good deed. Lastly, Mr. Johnson brings two people together by just fixing their problems and having them to meet each other (Lass). This example shows how acts of kindness can lead to other positive outcomes. I wish more people could be like Mr. Johnson. Characters Short Story Title: The Secret Life Of Walter Mitty Character’s major conflict type: Character vs. Self Character’s major conflict: Walter Mitty and his imaginations. The conflict type in this story is character versus self. This story’s conflict is between Walter Mitty and himself. He has many imaginations throughout this story where he imagines himself in them. For example, the firstShow MoreRelatedTheme Of Young Goodman Brown1021 Words   |  5 Pagessinning. Humans are by nature sinners and susceptible to evil since the fall of Adam and Eve. The short story â€Å"Young Goodman Brown† by Nathaniel Hawthorne depicts the theme of hypocrisy in the Puritan society and fall into temptation as the protagonist, Young Goodman Brown ventures out into the dark woods to join an evil ceremony. As a faithful, pious Puritan, Goodman Brown is easily swayed into the darkness of the woods which illustrates the corruptibility of the Puritan society and human natureRead MoreYoung Goodman Brown Analysis876 Words   |  4 PagesHawthorne’s story, â€Å"Young Goodman Br own,† appears to be a story about original sin with a lot of symbolism tied in to make it an allegory. An allegory is a story that can be interpreted in different ways to find the hidden meaning behind the symbolism in the story. The three things focused on throughout the short story is Faith, the forest that Goodman Brown takes his journey through, and the staff, which the old man who leads Goodman Brown on his way carries. The short story, â€Å"Young Goodman BrownRead MoreAraby, By James Joyce956 Words   |  4 PagesIn the short story â€Å"Araby,† James Joyce uses religion to give a the story deeper meaning. The narrator of the story finds himself in a confusing love that is unrealistic and distorted. In â€Å"Araby,† Joyce uses an underlying theme of religion to portray a confusing admiration that is brought to a twisted end. Throughout â€Å"Araby† there is an underlying theme of religion. The boy himself lives with his uncle who is feared by the other kids on the street. If he is seen the kids â€Å"hid in the shadows† untilRead MoreA Loss of Faith (Young Goodman Brown)1472 Words   |  6 PagesA Loss of Faith The short story â€Å"Young Goodman Brown† functions as an allegory of the Biblical fall of man, from which Nathaniel Hawthorne draws to illustrate what he sees as the inherent fallibility and hypocrisy in American religion. Hawthorne sets up a story of a man who is tempted by the devil and succumbs because of his curiosity and the weakness of his faith. Throughout the story Goodman struggles, not only with his Faith in Religion but also, his faith in people. The characters (GoodmanRead MoreAraby, By James Joyce1013 Words   |  5 Pages James Joyce’s short fiction, â€Å"Araby†, speaks of the loss of innocence when one enters adulthood. The narrator of â€Å"Araby† reflects back to his childhood and the defining moment when he reached clarity on the world he stood before. The young boy, living in a world lifeless and religious influence, becomes consumed with the lust of a neighbouring girl. The girl, Mangan, is symbolically the narrator’s chil dhood obsession with growing up. As she resembles the desire to become an adult, the Araby is theRead More Symbols, Setting, and Ironies of Joseph Conrads Heart of Darkness1201 Words   |  5 PagesSymbols, Setting, and Ironies of Heart of Darkness   Ã‚   Joseph Conrads novel, Heart of Darkness, is about many things: seafaring, riverboating, trade and exploration, imperialism and colonialism, race relations, the attempt to find meaning in the universe while trying to get at the mysteries of the subconscious mind. Heart of Darkness is a vivid portrayal of European imperialism.   The book in other words is a story about European acts of imperial mastery (1503)-its methods, and the effectsRead MoreLiterary Analysis Of Hawthorne s Young Goodman Brown 1175 Words   |  5 PagesGoodman Brown† â€Å"Young Goodman Brown† is a short story written by Nathaniel Hawthorne, and was set during the 17th Century Puritan Era. The story was published in 1835 during the Romantic Era. Nathaniel Hawthorne was known for being the master of symbolism. His novels and short stories have been embedded with suggestion and imagination. The dense symbolism that Hawthorne writes could imply multiple interpretations. â€Å"Young Goodman Brown† has quite a few themes and symbols within itself. Faith, YoungRead More Death in Stopping by Woods on a Snowy Evening Essay679 Words   |  3 Pageschains and ropes with which the trials and tribulations of life bind the human race. Death is a powerful theme in literature, symbolized in a plethora of ways. In Stopping by Woods on a Snowy Eve Robert Frost uses subtle imagery, symbolism, rhythm and rhyme to invoke the yearning for death that the weary traveler of life feels.    When the speaker in Stopping by Woods on a Snowy Eve pauses for a moments rest, he does not do so on a simple evening, but on the darkest evening of the yearRead More A Comparison of the Divine in Gilgamesh, the Old Testament of the Bible, and Metamorphoses1132 Words   |  5 Pagesform, and void; and darkness was upon the face of the deep. And the Spirit of God moved upon the face of the waters, (51) which was created by Him in six days (47), Thus the heavens and the earth were finished, and all the host of them. And on the seventh day God ended his work which he had made (52).    Though the Hebrew God is all-powerful, He creates human kind to have free will (47). This free will can be seen in the story of Adam and Eve. Gods warns both Adam and Eve that they can eatRead MoreThe Use of Color Symbolism by Nathaniel Hawthorne Essay1024 Words   |  5 Pagesevident in the story by Nathaniel Hawthorne, â€Å"Young Goodman Brown†. Nathaniel Hawthorn’s work is immersed with symbolism with most of it deriving from his Puritan beliefs. The themes of sin, guilt, innocence, and lust come forth through the uses of color symbolism as well as visual clues. All of these things are dealt with in everyday life in modern America. â€Å"His ability to create vivid and symbolic images that embody great moral questions appears strongly in his short stories.† (Bloom) To

I am My Language Free Essays

For every language that becomes extinct, an image of a man disappears† – Octavio Paz. Language is tied to many cultural backgrounds, heritage, and can form one’s identity. When a language is extinct or becoming extinct the culture, the history, and the people behind it disappear. We will write a custom essay sample on I am My Language or any similar topic only for you Order Now People come from â€Å"different countries that speak different languages, these different ways of communicating is a way to express themselves their thoughts and emotion freely. Losing a language can be detrimental because language expresses one’s identity and that is the essence of language. In both readings, â€Å"How to Tame a Wild Tongue† by Gloria Anzaldua and â€Å"If Black English Isn’t a Language, Then Tell Me What Is† by James Baldwin explain the deeper meaning behind language and extreme efforts to assimilate that would cause one to reject and or lose one’s identity. Language can play a small role in how individuals’ identities are formed. Language is a part of identity it has an impact on our personality which originates from different type languages in every nation such as dialects, accents, and terminology. In the first reading, â€Å"How to Tame A Wild Tongue† by Gloria Anzaldua she expresses the different languages she speaks or is compelled to speak. For example, Gloria states the language she uses are Standard English, working class and slang English, Standard Mexican Spanish, Chicano Spanish, and others. Gloria discusses being caught in the middle using her native tongue that is Chicano Spanish. English including the clash between the two cultures. â€Å"Until I am free to write bilingually and to switch codes without having always to translate, while I still have to speak English or Spanish when I would rather speak Spanglish†¦Ã¢â‚¬  (Anzaldua 39). In this quote Anzaldua does not want to be limited on how many languages she speaks, she also believes a person language will forever be a part of their identity. In addition, she believed that people shouldn’t have to change their identity, but they should embrace their culture because it’s part of what makes an individual unique. â€Å"Chicano Spanish sprang out of the Chicano’s need to identify we as a distinct people† this reveals that the Chicano Spanish is their legitimate identity that differentiates the people itself from both English and Spanish. This means that language forms identity for Chicano people to have a distinct language for themselves that relates to their cultural identity with  Chicano Spanish. Identically, Language can play a huge role in people live it can either unites them or separates them. â€Å"The limits of my language mean the limits of my world† by Ludwig Wittgenstein. In other words, this quote means that language is a form of expression that demonstrates cultural diversities of people from different countries. For example, limiting languages of the world can create barriers and can make it difficult for people to experience other  traditions. For instance, In the second reading â€Å"If Black English Isn’t a Language, Then Tell Me What Is† by James Baldwin he explains how drastic lifestyles can shape one’s language depending on the situation. In Baldwin article, he also explains how Black English was created. In this time, the whites did not want to give the slaves the opportunity learn how to read or write. Nor did they allow them to communicate with each other in their languages because they believed that education will lead the slaves to power. To demonstrate, Slavery dates to the 15th entury where many Africans were kidnapped from different tribes and was enslaved. Africans was from different tribes it was difficult from them to communicate or express concern with one other. This led to the creation of Black English. Furthermore, how important is language to one’s sense of identity? A sense of identity is perceived through language, ethnicity, race, and religion. Language creates one’s identity and can be altered by various circumstance whether it’s a hostile or friendly environment. Demonstrate this concept â€Å"It is the most vivid and crucial key to identify: It reveals the private identity, and connects one with, or divorces one from, the larger, public, or communal identity† (Baldwin). This quote reveals that language can either create bonds with other different types of people or can set them apart. Baldwin also states, â€Å"A language comes into existence by means of   brutal necessity, and the rules of the language are dictated by what the language must convey† (Baldwin). In other words, this means that when the slaves from the different tribes over the years they created Black English to communicate with one another in a form they can only understand each other. Black English was formed in a violent circumstance it benefited by creating a new form of language. In conclusion, both Anzaldua and Baldwin, explain the struggle of dealing with a hybrid identity formed by language. Both writers expressed how the different type of languages can create one’ identity willingly or with â€Å"brutal necessity†. Baldwin explains how the violent creation of Black English brought the different sets of the tribe together as one. Anzaldua talks about adjusting with two identities and finding pride speaking different types English and Spanish while keeping her native tongue intact. Both writers showed the different perspectives on the role of language by discussing the ways the African – Americans assimilate an identity with Black English and Chicano people with Spanish. Work Cited Anzaldua, Gloria. â€Å"How to tame a wild tongue† Everett’s. PDF. Page: 36-39 Baldwin, James. â€Å"If Black English Isn’t a Language, Then Tell Me, What is?† The New York Times. 29, July, 1979. How to cite I am My Language, Papers

Money and Foreign Exchange

Questions: A US importer will have a net cash outflow of EURO2,500,000 in payment for goods bought in January 2015 (assumed to be 0.25 years away). The importer wishes to hedge this risk to avoid the exchange rate risk and is considering hedging using (i) at the money call options on the pound; (ii) a forward contract and (iii) a combination of calls and puts.The prevailing market data is given below:Market Data (1st October 2014)Spot Exchange Rate = $1.2596/EuroThree month Euro interest rate = 0.1% p.a.Three month US Dollar interest rate = 0.3% p.a.Premium on a May Euro Call Option, Strike = $1.24/Euro = 2.89 cents/EuroPremium on a May Euro Call Option, Strike = $1.26/Euro = 1.72 cents/EuroPremium on a May Euro Call Option, Strike = $1.28/Euro = 0.91 cents/EuroPremium on a May Euro Put Option, Strike = $1.24/Euro = 0.87 cents/EuroPremium on a May Euro Put Option, Strike = $1.26/Euro= 1.70 cents/EuroPremium on a May Euro Put Option, Strike = $1.28/Euro = 2.89 cents/EuroRequired:1. What is meant by covered interest parity? Using the data above calculate a three month forward rate to buy Euros for dollars.2. Explain, using the market data above, how call options on foreign currenct can be used to establish a ceiling price when purchasing foreign currency and how put options can be used to establish a floor price when selling foreign currency.3. Consider, using the market data above, the obligations on the SELLER of each of these calls and puts if the option were to be exercised. Identify the circumstances when the options would be exercised. Answers: 1. Covered Interest Parity Covered Interest Parity is such situation where the interest rate becomes almost equal to currency value of two nations. In such situation, any arbitrage opportunities or return cannot be possible to earn doing trading between the currencies of two countries (Aizenman, J. and Hutchison, M. 2010). As for example, the currency value and interest rate of Country A and Country B are same. The interest rates of Country A and Country B are respectively 10% and 7%. An investor borrows a certain amount in the currency of Country B and he thinks to invest the money in the currency of Country A. So, it is required to convert the money with spot price of Country A. For the repayment of borrowing money, the investor needs to go for a forward back for bringing back the money from the currency of Country A to Country B. At that time, the inventors cannot earn any profit due to existence of covered interest parity. Covered interest parity eradicates the entire profits from the trading of currency (Chandler, M. 2009). Calculation of Forward Rate Forward is the currency exchange rate for future. A commercial bank gives guarantee to exchange the currency of a country to another currency of a country and obviously at a specified future date. It is calculated on the basis of spot price of currency (Chen, J. 2009). Forward can be calculated by using following formula: Where, S is spot exchange rate of two countries. rd is domestic interest rate rf is foreign interest rate Given, Spot Exchange rate is $1.2596/Euro Three months Euro interest rate is 0.1% p.a. Three month US Dollar interest rate is 0.3% p.a. It is assumed that the total number of days in a year is 360 (Croke, L. 2009). So, the forward rate is calculated as follows: =1.2589 Therefore, the three months forward rate of Dollar and Euro is 1.2589. 2. Establishment of Ceiling Price through call options on foreign currency when purchasing Ceiling price is the highest price where buyer has to pay for buying the options. Ceiling price is the highest price limit where sell can charge against an option (Cuhaj, G. 2009). If the ceiling is price is greater than the current spot price than buyer of the call option can exercise the options. Ceiling Price = Strike Price + Premium Strike price is price of a option which is the particular price at which the currency option can be purchased or sold by the possessor or the purchaser of the option contract (Davidson, A. 2009). Usually, the strike price is set which is closer to current spot price. Premium is a price which is paid by the buyer of an option for right to buy or sell the option. The premium price is paid to seller of an option (Dobeck, M. and Elliott, E. 2007). Strike Price Premium Ceiling Price Situation $1.24 0.0289 $1.27/Euro Ceiling Price Spot Price $1.26 0.0172 $1.28/Euro Ceiling Price Spot Price $1.28 0.0091 $1.29/Euro Ceiling Price Spot Price Here, the spot price is $1.2596/Euro. It is observed in the above table that the all the cases have the ceiling price greater than the current spot price of option. So, the buyer may not exercise the option. Establishment of Floor Price through put options on foreign currency when selling Floor price is the lowest price at which seller of the option allows to sold the option. If the floor price is less than current spot price the seller of the put option would not exercise the option (Fabozzi, et al, M. 2002). Floor Price = Strike Price Premium Strike Price Premium Floor Price Situation $1.24 0.0087 $1.23/Euro Floor Price Spot Price $1.26 0.017 $1.24/Euro Floor Price Spot Price $1.28 0.0289 $1.25/Euro Floor Price Spot Price In the above table, it can be seen that the all the case of put options have the floor price is less than the current spot price of option. So, the seller may not exercise the option (Homberg, D. and Troltzsch, F. 2013). 3. Obligations on the Seller of given each calls and puts Seller obligation on call options The obligation of seller is to sell the underlying security if the call option is exercised by the call purchaser on or before the expiry date of option (Jacque, L. 2010). If the spot price is less than equal to exercise price or strike price, the seller only can earn the premium amount from the call option (Landuyt, G. et al R. 2009). When the spot price of currency call option is greater than the strike price or exercise price, the seller may have to bear loss beyond the premium amount (Makin, A. 2009). In case of Spot Price Strike Price, Sellers Payoff for Call Option (US$/Euro) = Premium Price In case of Spot Price Strike Price, Sellers Payoff for Call Option (US$/Euro) = Spot Price - (Strike Price + Premium) Strike Price Premium Spot Price Payoff $1.24 0.0289 $1.2596 ($0.0093) $1.26 0.0172 $1.2596 $0.0172 $1.28 0.0091 $1.2596 $0.0091 According to the above table, it can be observed that the payoff of selling a call option is negative. So, at strike price of $1.24, seller has to bear loss of $0.0093 if it is exercised by the call buyer (Neaime, S. and Colton, N. 2005). At strike price $1.26; the seller can earn the profit equal to premium price $0.0172 if the call holder exercises the option. At strike price $1.28; the seller also can earn only the premium price $0.0172 if it is exercised by the call buyer. Seller obligation on put options The obligation of seller in case of put option is to purchase the underlying security if the pet option is exercised by the put holder on or before expiry date (Rebonato, et al 2009). If the spot price is less than equal to exercise price or strike price of a put option, the seller may earn or may have to bear the loss. The loss or earnings depends on the premium amount of the put option. When, the spot price is greater than the strike price, the seller can earn only the premium amount of put option (Ramaswamy, S. 2011). In case of Spot Price Strike Price, Sellers Payoff for Put Option (US $/Euro) = (Spot Price Strike Price) + Premium In case of Spot Price Strike Price, Sellers Payoff for Put Option (US $/Euro) = Premium Price Strike Price Premium Spot Price Payoff $1.24 0.0087 $1.2596 $0.0087 $1.26 0.017 $1.2596 $0.0166 $1.28 0.0289 $1.2596 $0.0085 In case of strike price of $1.24, the seller can only earn the premium amount ($0.0087) of the put options if it is exercised by the put buyer. In case of strike price of $1.26, the seller can gain more ($0.0166) from selling of put option if it is exercised by the put buyer. In case of strike price of $1.28, the seller can also gain profit of $0.0085 from the selling of put option if it is exercised by the put buyer. Circumstances when the options would be exercised Buyers Payoff for a call option Strike Price Premium Spot Price Payoff $1.24 0.0289 $1.2596 -$0.0093 $1.26 0.0172 $1.2596 -$0.0172 $1.28 0.0091 $1.2596 -$0.0091 The above table describes that, the buyer has to bear loss less at $1.24 among the others strike prices. In case of others strike prices, the buyer can suffer equal to premium price. Buyers Payoff for a put option Strike Price Premium Spot Price Payoff $1.24 0.0087 $1.2596 -$0.0087 $1.26 0.017 $1.2596 -$0.0166 $1.28 0.0289 $1.2596 -$0.0085 According to the above table, it is observed that the buyer can bear loss equal to premium price at strike price $1.24. The highest loss will be at strike price $1.26. The loss is less at strike price $1.28 among the others strike prices (Senders, S. and Truitt, A. 2007). 4. Calculation on market data: Table 1: Price on expiry date Exercise price Premium in cents Pay off Exercise Price Premium in cents Pay off Net Pay Off 1.20 1.25 2.89 (2.89) 1.25 0.87 0.87 (2.02) 1.21 1.25 2.89 (2.89) 1.25 0.87 0.87 (2.02) 1.22 1.25 2.89 (2.89) 1.25 0.87 0.87 (2.02) 1.23 1.25 2.89 (2.89) 1.25 0.87 0.87 (2.02) 1.24 1.25 2.89 (2.89) 1.25 0.87 0.87 (2.02) 1.25 1.25 2.89 (2.89) 1.25 0.87 0.87 (2.02) 1.26 1.25 2.89 0.05 1.25 0.87 (0.01) 0.04 1.27 1.25 2.89 0.07 1.25 0.87 (0.02) 0.05 1.28 1.25 2.89 0.09 1.25 0.87 (0.03) 0.06 1.29 1.25 2.89 0.11 1.25 0.87 (0.04) 0.07 1.30 1.25 2.89 0.14 1.25 0.87 (0.05) 0.09 1.31 1.25 2.89 0.16 1.25 0.87 (0.06) 0.10 1.32 1.25 2.89 0.18 1.25 0.87 (0.07) 0.11 According to the table 1, the research analyst analyses that United States of American importer has hedged his money and the analyst observed that the importer has faced a loss by hedging his portfolio. The total net pay off the U.S. importer is -11.60 in cents (Singh, M. 2010). Table 2: Price on expiry date Exercise price Premium in cents Pay off Exercise Price Premium in cents Pay off Net Pay Off 1.20 1.25 1.72 (1.72) 1.25 1.70 1.70 (0.02) 1.21 1.25 1.72 (1.72) 1.25 1.70 1.70 (0.02) 1.22 1.25 1.72 (1.72) 1.25 1.70 1.70 (0.02) 1.23 1.25 1.72 (1.72) 1.25 1.70 1.70 (0.02) 1.24 1.25 1.72 (1.72) 1.25 1.70 1.70 (0.02) 1.25 1.25 1.72 (1.72) 1.25 1.70 1.70 (0.02) 1.26 1.25 1.72 (0.80) 1.25 1.70 0.53 (0.27) 1.27 1.25 1.72 (0.79) 1.25 1.70 0.52 (0.27) 1.28 1.25 1.72 (0.78) 1.25 1.70 0.51 (0.27) 1.29 1.25 1.72 (0.77) 1.25 1.70 0.50 (0.27) 1.30 1.25 1.72 (0.76) 1.25 1.70 0.49 (0.27) 1.31 1.25 1.72 (0.75) 1.25 1.70 0.48 (0.27) 1.32 1.25 1.72 (0.74) 1.25 1.70 0.47 (0.27) According to the table 2, the research analyst analyses that United States of American importer has hedged his money and the analyst observed that the importer has faced a loss by hedging his portfolio. The total net pay off the U.S. importer is -2.01 in cents (Williams, R. 2011). Table 3: Price on expiry date Exercise price Premium in cents Pay off Exercise Price Premium in cents Pay off Net Pay Off 1.20 1.25 0.91 (0.91) 1.25 2.89 2.89 1.98 1.21 1.25 0.91 (0.91) 1.25 2.89 2.89 1.98 1.22 1.25 0.91 (0.91) 1.25 2.89 2.89 1.98 1.23 1.25 0.91 (0.91) 1.25 2.89 2.89 1.98 1.24 1.25 0.91 (0.91) 1.25 2.89 2.89 1.98 1.25 1.25 0.91 (0.91) 1.25 2.89 2.89 1.98 1.26 1.25 0.91 (0.02) 1.25 2.89 0.04 0.02 1.27 1.25 0.91 (0.01) 1.25 2.89 0.02 0.01 1.28 1.25 0.91 0 1.25 2.89 0 0 1.29 1.25 0.91 0.01 1.25 2.89 (0.02) (0.01) 1.30 1.25 0.91 0.02 1.25 2.89 (0.04) (0.02) 1.31 1.25 0.91 0.03 1.25 2.89 (0.06) (0.03) 1.32 1.25 0.91 0.04 1.25 2.89 (0.08) (0.04) According to the table 3, the research analyst analyses that United States of American importer has hedged his money and the analyst observed that the importer has made a profit by hedging his portfolio. The total net pay off the U.S. importer is 11.85 in cents (Zeldes, S. and Geanakoplos, J. 2009). The research analyst observed that the U.S. importer has made a loss from his portfolio by hedging in different ways. From the above three table i.e., table 1, table, and table 3, the importer has made a loss of (11.6) cents from the table 1, from table 2 the importer has made a loss of (2.01) cents and from table 3 the importer has made a profit of 11.85 cents. But the total net loss made by the importer by hedging is (1.76) cents (Makin, A. 2009). References: Aizenman, J. and Hutchison, M. (2010). Exchange market pressure and absorption by international reserves. Cambridge, Mass.: National Bureau of Economic Research. Chandler, M. (2009). Making sense of the dollar. New York: Bloomberg Press. Chen, J. (2009). Essentials of foreign exchange trading. Hoboken, N.J.: John Wiley. Croke, L. (2009). I'm broke!. St. Catharines, Ont.: Crabtree Pub. Cuhaj, G. (2009). Standard catalog of world paper money. Iola, WI: Krause. Davidson, A. (2009). How the global financial markets really work. 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