What are the arguments for a company to hedge transaction exposure?
What are the arguments for a company to hedge transaction exposure?
Homework Answers
Arguments for a company to hedge transaction exposure
are
1. Hedging Transaction exposure helps when companies buy or sell in
different currencies. It occurs when there is international trade
.
2. It hedges against fluctuation of exchange rate affecting the
profit or loss of the company.
3. Hedging tthrough forwards contracts help to mitigate transaction
exposure
What are the arguments against a MNC hedging transaction exposure? Why should companies not hedge?
What are the arguments against a MNC hedging transaction exposure? Why should companies not hedge?
explain the reason why the manager should not hedge their transaction exposure.
explain the reason why the manager should not hedge their transaction exposure.
(1)(a)What is exchange rate risk? Distinguish between Transaction Exposure and Economic exposure to exchange rate movements....
(1)(a)What is exchange rate risk? Distinguish between Transaction Exposure and Economic exposure to exchange rate movements. (b)Consider the following information: 90-day U.S interest rate..... ..4% 90-day Malaysian interest rate.. .3% 90-day forward rate for the Malaysian Ringgit $0.400 Spot Rate of Malaysian Ringgit ..$0.404 Assume a U.S based MNC will need 300,000 Ringgit in 90 days and wishes to hedge this payable position. Would it be better off using a FORWARD hedge or MONEY MARKET hedge?
Gransh 9. Forward hedge Please refer to Table 3 in the datafile. To hedge exposure from...
Gransh 9. Forward hedge Please refer to Table 3 in the datafile. To hedge exposure from a receivable of 1min EUR due in 3 months, Ganado could enter into a forward position, thus fixing an effective exchange rate of EUR/USD a) long; 1.1919 b) short; 1.1919 C) short; 1.1911 d) long; 1.1911 Ganado is a US company interested in hedging currency risk from its European business. You observe the following information related to hedging transaction exposure. ask bid 1,1823 EUR/USD...
The main technique to manage accounting exposure is a balance sheet hedge. forward market hedge. foreign...
The main technique to manage accounting exposure is a balance sheet hedge. forward market hedge. foreign currency options hedge. square position. money market hedge.
a) Why do you think Volkswagen's management decided to hedge only 30 percent of their foreign currency exposure in 2...
a) Why do you think Volkswagen's management decided to hedge only 30 percent of their foreign currency exposure in 2003? What would have happened if they had hedged 70 percent of their exposure? (12 points) b) An oil company has agreed to buy oil from Russia at 1,800 Rubles per barrel. Have it shipped to Amsterdam by a Norwegian shipping line for 20 Krones per barrel. The oil will be refined in Rotterdam for 20 Euros per barrel. Finally, a...
an MNC could the currency forward. Forward contracts can be used to eliminate transaction exposure. For...
an MNC could the currency forward. Forward contracts can be used to eliminate transaction exposure. For example, to hedge a a. [Receivable; sell] and [Payable; sell] O b. Receivable; sell O c. Payable; sell d. Receivable; buy e. [Receivable; buy] and [Payable; sell] Hide Feedback Incorrect
Which of the below statements is NOT true: A. Like a forward market hedge, a money...
Which of the below statements is NOT true: A. Like a forward market hedge, a money market hedge also involves a contract and a source of funds to fulfill that contract. In this instance, the contract is a loan agreement. B. Hedging transaction exposure with option contracts allows the firm to benefit if exchange rates are favorable but protects the firm if exchange rates turn unfavorable. C. A firm's beta is a combination of management's philosophy toward transaction exposure and...
Hedging transaction exposure You are the CFO of a medium-sized Norwegian fish-farming company, which has just...
Hedging transaction exposure You are the CFO of a medium-sized Norwegian fish-farming company, which has just delivered 100,000 kilos of fresh salmon to Delli Fisheries of London, U.K. Guaranteed payment of £1,000,000 is due in 90 days. You are considering three alternative hedges, these market data apply this morning: Spot rate NOK 10.2505/£ Forward NOK 10.2627/£ NOK rate 2.15% p.a. GBP rate 1.67% p.a. Put option at exercise NOK 10.2627/£ Put option premium NOK 0.0500/£ (a) Demonstrate numerically the extent...
Which of the following are methods to hedge economic exposure? Select one: Futures contracts Options contracts...
Which of the following are methods to hedge economic exposure? Select one: Futures contracts Options contracts Balancing revenues and expenses More than one of the above
(1)(a)What is exchange rate risk? Distinguish between Transaction Exposure and Economic exposure to exchange rate movements. (b)Consider the following information: 90-day U.S interest rate..... ..4% 90-day Malaysian interest rate.. .3% 90-day forward rate for the Malaysian Ringgit $0.400 Spot Rate of Malaysian Ringgit ..$0.404 Assume a U.S based MNC will need 300,000 Ringgit in 90 days and wishes to hedge this payable position. Would it be better off using a FORWARD hedge or MONEY MARKET hedge?
Gransh 9. Forward hedge Please refer to Table 3 in the datafile. To hedge exposure from a receivable of 1min EUR due in 3 months, Ganado could enter into a forward position, thus fixing an effective exchange rate of EUR/USD a) long; 1.1919 b) short; 1.1919 C) short; 1.1911 d) long; 1.1911 Ganado is a US company interested in hedging currency risk from its European business. You observe the following information related to hedging transaction exposure. ask bid 1,1823 EUR/USD...
an MNC could the currency forward. Forward contracts can be used to eliminate transaction exposure. For example, to hedge a a. [Receivable; sell] and [Payable; sell] O b. Receivable; sell O c. Payable; sell d. Receivable; buy e. [Receivable; buy] and [Payable; sell] Hide Feedback Incorrect
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