aribou River. Caribou River, Ltd., a Canadian manufacturer of raincoats, does not selectively hedge its transaction exposure. Instead, if the date of the transaction is known with certainty, all foreign currency-denominated cash flow e following mandatory forward cover formula: . aribou expects to receive multiple payments in Danish kroner over the next year. Kr3,000,000 is due in 90 days; Kr2,300,000 is due in 180 days; and Kr950,000 is due in one year. Using the following spot and forward exchange rate ould be the amount of forward cover required by company policy for each period? What would be the Canadian dollar amount of forward cover required by company policy in 3 months? $ ☐ (Round to the nearest cent.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Mandatory Forward Cover Paying the points forward Receiving the points forward 0-90 days 91-180 days 180 days 90% 70% 45% 100% 90% 50% Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Spot rate, Kr/C$ 4.61 3-month forward rate, Kr/C$ 6-month forward rate, Kr/C$ 12-month forward rate, Kr/CS 4.62 4.65 4.67
aribou River. Caribou River, Ltd., a Canadian manufacturer of raincoats, does not selectively hedge its transaction exposure. Instead, if the date of the transaction is known with certainty, all foreign currency-denominated cash flow e following mandatory forward cover formula: . aribou expects to receive multiple payments in Danish kroner over the next year. Kr3,000,000 is due in 90 days; Kr2,300,000 is due in 180 days; and Kr950,000 is due in one year. Using the following spot and forward exchange rate ould be the amount of forward cover required by company policy for each period? What would be the Canadian dollar amount of forward cover required by company policy in 3 months? $ ☐ (Round to the nearest cent.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Mandatory Forward Cover Paying the points forward Receiving the points forward 0-90 days 91-180 days 180 days 90% 70% 45% 100% 90% 50% Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Spot rate, Kr/C$ 4.61 3-month forward rate, Kr/C$ 6-month forward rate, Kr/C$ 12-month forward rate, Kr/CS 4.62 4.65 4.67
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Caribou River. Caribou River, Ltd., a Canadian manufacturer of raincoats, does not selectively hedge its transaction exposure. Instead, if the date of the transaction is known with certainty, all foreign currency-denominated cash flows must utilize
the following mandatory forward cover formula:
Caribou expects to receive multiple payments in Danish kroner over the next year. Kr3,000,000 is due in 90 days; Kr2,300,000 is due in 180 days; and Kr950,000 is due in one year. Using the following spot and forward exchange rates, what
would be the amount of forward cover required by company policy for each period?
What would be the Canadian dollar amount of forward cover required by company policy in 3 months?
C$
(Round to the nearest cent.)
Data table
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
(Click on the following icon in order to copy its contents into a spreadsheet.)
Spot rate, Kr/C$
4.61
Mandatory Forward Cover
0-90 days
Paying the points forward
Receiving the points forward
90%
91-180 days
70%
180 days
45%
3-month forward rate, Kr/C$
4.62
100%
90%
50%
6-month forward rate, Kr/C$
12-month forward rate, Kr/CS
4.65
4.67
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