EXERCISE 20 EXPORSA, an export firm, will collect 100.000 GBP in six months. GBP is quoted with a discount of 520-490 basis points for six months forward. The firm thinks GBP will depreciate against euro 5% in six months. Spot Exchange rate is 1,5015-5125 €/£. a) Should EXPORSA sell forward its GBP at the foreign exchange market? Why? b) Would be the answer of the question the same if interest rates are: Ask 2,75 % 5,50 % Six-month euro annual interest rate Six-month GBP annual interest rate Bid 2,50 % 5,25 %
EXERCISE 20 EXPORSA, an export firm, will collect 100.000 GBP in six months. GBP is quoted with a discount of 520-490 basis points for six months forward. The firm thinks GBP will depreciate against euro 5% in six months. Spot Exchange rate is 1,5015-5125 €/£. a) Should EXPORSA sell forward its GBP at the foreign exchange market? Why? b) Would be the answer of the question the same if interest rates are: Ask 2,75 % 5,50 % Six-month euro annual interest rate Six-month GBP annual interest rate Bid 2,50 % 5,25 %
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
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![EXERCISE 20
EXPORSA, an export firm, will collect 100.000 GBP in six months. GBP is quoted with a
discount of 520-490 basis points for six months forward. The firm thinks GBP will depreciate
against euro 5% in six months. Spot Exchange rate is 1,5015-5125 €/£.
a) Should EXPORSA sell forward its GBP at the foreign exchange market? Why?
b) Would be the answer of the question the same if interest rates are:
Bid
Ask
2,50 %
2,75%
5,25 %
5,50 %
Six-month euro annual interest rate
Six-month GBP annual interest rate](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F79ef1921-fe42-4058-bd61-49e737b7eb5b%2F7aa1c5a0-900d-4e84-9b92-8dc102feff0e%2Fhmb7q4h_processed.jpeg&w=3840&q=75)
Transcribed Image Text:EXERCISE 20
EXPORSA, an export firm, will collect 100.000 GBP in six months. GBP is quoted with a
discount of 520-490 basis points for six months forward. The firm thinks GBP will depreciate
against euro 5% in six months. Spot Exchange rate is 1,5015-5125 €/£.
a) Should EXPORSA sell forward its GBP at the foreign exchange market? Why?
b) Would be the answer of the question the same if interest rates are:
Bid
Ask
2,50 %
2,75%
5,25 %
5,50 %
Six-month euro annual interest rate
Six-month GBP annual interest rate
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