The outcome of a money market hedge for C$200,000 6-month accounts receivable is when the spot...
The outcome of a money market hedge for C$200,000 6-month accounts receivable is when the spot rate is $0.9925 and the U.S and C$ interest rates are 3.00% and 3.5% respectively?
Homework Answers
Receivables after 6 months = C$200,000
Under money market hedge, following steps will be undertaken
1.borrow C$ such that principal plus interest after 6 months become equal to the amount Receivable
= 200,000/(1+3.5%*6/12)
= C$196,560.20
Convert into Dollar at spot rate
= 196,560.20*0.9925
= $195,085.9985
= $195,086(approx.)
The loan will be repaid after 6 months from the amount receiRecei
Add Answer to:
The outcome of a money market hedge for C$200,000 6-month
accounts receivable is when the spot...
. Given the following information: Spot rate €.6/$, 6 month forward rate €.61/$, interest rates p.a....
. Given the following information: Spot rate €.6/$, 6 month forward rate €.61/$, interest rates p.a. in the US (Germany) are 4% (6%) respectively, a call option with a strike price of €.59/$ with a 2% premium, a put option with a strike price €.605/$ with a premium of 2.5%. How could you hedge a €200 million receivable? What is the breakeven exchange rate between the option alternative you choose and the forward market hedge?
Money Market Versus Put Option Hedge. Narto Co. (a U.S. firm) exports to Switzerland and expects...
Money Market Versus Put Option Hedge. Narto Co. (a U.S. firm) exports to Switzerland and expects to receive 500,000 Swiss francs in one year. The one-year U.S. interest rate is 5% when investing funds and 7% when borrowing funds. The one-year Swiss interest rate is 9% when investing funds, and 11% when borrowing funds. The spot rate of the Swiss franc is $.80. Narto expects that the spot rate of the Swiss franc will be $.75 in one year. There...
) A U.S. firm imports €10 million of goods from a German firm, and needs to...
) A U.S. firm imports €10 million of goods from a German firm, and needs to pay the full amount to the firm in 6 months. This U.S firm is engaging in the money market hedge in order to eliminate the transaction exposure. The following rates are available to the US firm: 6 month US interest rates = 3%, 6 month German interest rates = 5%, and the spot exchange rate (S$/€) = $1.20/€. a. Describe the money market hedging...
A U.S. firm imports €10 million of goods from a German firm, and needs to pay...
A U.S. firm imports €10 million of goods from a German firm, and needs to pay the full amount to the firm in 6 months. This U.S firm is engaging in the money market hedge in order to eliminate the transaction exposure. The following rates are available to the US firm: 6 month US interest rates = 3%, 6 month German interest rates = 5%, and the spot exchange rate (S$/€) = $1.20/€. a. Describe the money market hedging strategy...
A U.S. firm imports €10 million of goods from a German firm, and needs to pay...
A U.S. firm imports €10 million of goods from a German firm, and needs to pay the full amount to the firm in 6 months. This U.S firm is engaging in the money market hedge in order to eliminate the transaction exposure. The following rates are available to the US firm: 6 month US interest rates = 3%, 6 month German interest rates = 5%, and the spot exchange rate (S$/€) = $1.20/€. a. Describe the money market hedging strategy...
A U.S. firm imports €10 million of goods from a German firm, and needs to pay...
A U.S. firm imports €10 million of goods from a German firm, and needs to pay the full amount to the firm in 6 months. This U.S firm is engaging in the money market hedge in order to eliminate the transaction exposure. The following rates are available to the US firm: 6 month US interest rates = 3%, 6 month German interest rates = 5%, and the spot exchange rate (S$/€) = $1.20/€. a. Describe the money market hedging strategy...
A U.S. firm imports €10 million of goods from a German firm, and needs to pay...
A U.S. firm imports €10 million of goods from a German firm, and needs to pay the full amount to the firm in 6 months. This U.S firm is engaging in the money market hedge in order to eliminate the transaction exposure. The following rates are available to the US firm: 6 month US interest rates = 3%, 6 month German interest rates = 5%, and the spot exchange rate (S$/€) = $1.20/€. a. Describe the money market hedging strategy...
A U.S. based firm has a receivable of Norwegian krone (NKr) of NKr 22,356,322, which will...
A U.S. based firm has a receivable of Norwegian krone (NKr) of NKr 22,356,322, which will be received 110 days from today. (a) The firm-specific interest rate for borrowing NKr is 4%, and the firm can invest dollars internally at a rate of return of 12%. The spot exchange rate is 7.5 NKr/$. Calculate the amount of dollars received with a money market hedge. (b) Suppose the firm is also considering using a forward contract. The market rate of interest...
Can You help me with this? Ill rate 5 stars Money Market Hedge on Payables. Blake...
Can You help me with this? Ill rate 5 stars
Money Market Hedge on Payables. Blake Inc. needs €1,000,000 in 30 days. It can earn 5% annualized on a German security. The current spot rate for the euro is $1.00. Blake can borrow funds in the United States at an annualized interest rate of 6%. If Blake uses the money markets to hedge the payable, what is the cost of implementing the hedge?
A US firm plans to use a money market hedge to hedge its payment of five...
A US firm plans to use a money market hedge to hedge its payment of five million British pounds for British goods in one year. The US interest rate is 5% and the British interest rate is 7%. The spot rate of the British pound is $1.65 and the one-year forward rate is $1.60. How many British pounds does the firm need to invest today? How many US dollars does the firm need to borrow today?
Can You help me with this? Ill rate 5 stars
Money Market Hedge on Payables. Blake Inc. needs €1,000,000 in 30 days. It can earn 5% annualized on a German security. The current spot rate for the euro is $1.00. Blake can borrow funds in the United States at an annualized interest rate of 6%. If Blake uses the money markets to hedge the payable, what is the cost of implementing the hedge?
Most questions answered within 3 hours.
-
A 1,150 lumen light bulb is placed 37 cm in front of a mirrored
wall, whose...
asked 5 minutes ago -
Given that z is a standard normal random variable, compute the
following probabilities (to 4 decimals)....
asked 12 minutes ago -
You begin preparation of the calibration curve to measure
absorbance vs concentration of FeSCN2+. To do...
asked 29 minutes ago -
When you speak after breathing helium, in which the speed of
sound is much greater than...
asked 22 minutes ago -
3. Stock Valuation: You are the CEO of Under Armour, Inc. and
are thinking about how...
asked 26 minutes ago -
Choose a brand. Critique the brand in terms of its brand
positioning, brand identity and brand...
asked 28 minutes ago -
A vertical curve has grades G1 = 2.8% (downgrade) and
G2 = 2.2 (upgrade) Assume design...
asked 29 minutes ago -
(a) Derive planar density expressions for BCC
(110) plane in terms of the atomic radius R....
asked 24 minutes ago -
I have this problem now and I am not sure what we are exactly
supposed to...
asked 30 minutes ago -
Use the following set of observed frequencies to test the
independence of the two variables. Variable...
asked 53 minutes ago -
Two kg of ice at -15 °C are placed in a 2 kg bath of water...
asked 53 minutes ago -
Describe the following with suitable
examples.
1- Security Policy Heterogeneity
2-Security Model Heterogeneity
3-Security Mechanism Heterogeneity...
asked 54 minutes ago