Assume that Stevens Point Co. has net payables of 200,000 Singapore dollars in 90 days. The spot rate of the S$ is US$0.71/1S$, and the Singapore periodic interest rate is 1.5% over 90 days (annual rate is 6% per year, so periodic rate is 1.5% per 90 days). Assume US periodic interest rates of 1% over 90 days or (annual rate is 4%, so periodic rate is 1% per 90 days). If the U.S. firm could implement a money market hedge, what is the cost of the payables in US dollars in 90 days using a money market hedge? Assume borrowing and lending rates are the same for simplicity. Be precise.
Assume that Stevens Point Co. has net payables of 200,000 Singapore dollars in 90 days. The spot rate of the S$ is US$0.71/1S$, and the Singapore periodic interest rate is 1.5% over 90 days (annual rate is 6% per year, so periodic rate is 1.5% per 90 days). Assume US periodic interest rates of 1% over 90 days or (annual rate is 4%, so periodic rate is 1% per 90 days). If the U.S. firm could implement a money market hedge, what is the cost of the payables in US dollars in 90 days using a money market hedge? Assume borrowing and lending rates are the same for simplicity. Be precise.
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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Assume that Stevens Point Co. has net payables of 200,000 Singapore dollars in 90 days. The spot rate of the S$ is US$0.71/1S$, and the Singapore periodic interest rate is 1.5% over 90 days (annual rate is 6% per year, so periodic rate is 1.5% per 90 days). Assume US periodic interest rates of 1% over 90 days or (annual rate is 4%, so periodic rate is 1% per 90 days). If the U.S. firm could implement a
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