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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