Question

Instructions: Show all calculations in detail. No partial credit will be given for just answers. J. Borrow NZS645,455 1) Assume the following information: (NZ$600,000/1.1) = N2 $545,455 2. convert U.S. deposit rate for 1 year = 11% U.S. borrowing rate for 1 year N2 3545,455(+ $.39 per NZA-212,73 = 12% New Zealand deposit rate for 1 year 3, invest S$212.727 to accomuiate = 8% New Zealand borrowing rate for 1 year = 10% $234,12+($212,727 x 1.11)=5236,127 New Zealand dollar forward rate for 1 year= $.40/NZ$ New Zealand dollar spot rate = $.39/NZ$ Also assume that a U.S. exporter denominates its New Zealand exports in NZ$ and expects to receive NZ$600,000 in 1 year. You are a consultant for this firm. Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a money market hedge?

Answer 1

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ke - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut m Find & :.: Cell Styles Insert Delete Format Conditional Format Formatting as Table Styles Calibri -11AA = = = Dr Wrap Text General E Copy Paste Format Painter BI U D- DA Merge & Center - $ % , Clipboard Font Alignment Number 10539 fic L L 1 IKILIM IN Σ AutoSum : A Fill 2 Sort & 2 Clear Filter Editing Select Cells IP Q R 538 539 540 541 AMOUNT RECEIVABLE UNDER MONEY MARKET HEDGE step 1: NZ$ today Amount of NZ$ to be borrowed = 600000 / 1.10 542 545454.55 543 544 step 2: convert this 545454.55 NZ$ to US dollars today at spot rate dollar received today = 545454.55 X 0.39 = 545 212727.27 546 547 step 3: invest in US @11% After a year, amount receivable = 212727.27*(1+0.11) = 548 236127.27 549 550 551 552 553 step 4: you have to pay NZ$ 600000 after a year which is exactly the same you will receive from your party So $236127.27 received without any risk 236127.27 554 AMOUNT RECEIVABLE UNDER MONEY MARKET HEDGE = 236127.27 555 556 K M convexity DGM betaport future INDEX INTL CAP BUD LEASING PV, FV, ANNUITY DIR right clean YIELD bond portfolio KE CAPM UTILITY, SHARPE, beta ferences: GF466 cap stru WACC BO! 120% RESI el O Rea ...Bag OENG 22-11-2019