our firm is an Italian exporter of bicycles. You have sold an order to a British firm for £1,000,000 worth of bicycles. Payment from the customer (in pounds sterling) is due in 12 months. Detall a strategy using futures contracts that will hedge your exchange rate risk. Have an estimate of how many contracts of what type and maturity. Contract Size £10,000 €10,000 SFr.10,000 Country Britain (pound) 1 month forward. 3 months forwardi 6 months forwardi 12 months forward Euro 1 month forward. 3 months forward. 6 months forward 12 months forward Swiss franc 1 month forward 3 months forwardi 6 months forward. 12 months forwardi U.S. $ equiv. Tuesday $1.9600 Currency per U.S. $ Tuesday Monday £0.5155 £0.5128 10.5102 Monday $1.9400 $1.9700 $1.9500 $1.9800 $1.9600 $1.9900 $1.9700 $2.0000 $1.9800 $1.5600 $1.5400 $1.5700 $1.5500 $1.5800 $1.5600 $1.5900 $1.5700 $1.6000 $1.5800 $0.9200 $0.9000 $0.9400 $0.9200 SPr.1.0638 $0.9600 $0.9400 SPr.1.0417 $0.9800 $0.9600 SPr.1.0204 $1.0000 $0.9800 SPr.1.0000 SFr.1.0204 SFr.1.0870 EO.5102 £0.5076 £0.5051 EO.5025 £0.5000 co.64101 €0.6369 €0.6329 €0.6289 €0.6250 £0.5076 10.5051 CO.6494 €0.6452 €0.6410 €0.6369 Co.6329 SPr.1.1111 SFr.1.0870 SFE.1.0638 SPr.1.0417

our firm is an Italian exporter of bicycles. You have sold an order to a British firm for £1,000,000 worth of bicycles. Payment from the customer (in pounds sterling) is due in 12 months. Detall a strategy using futures contracts that will hedge your exchange rate risk. Have an estimate of how many contracts of what type and maturity. Contract Size £10,000 €10,000 SFr.10,000 Country Britain (pound) 1 month forward. 3 months forwardi 6 months forwardi 12 months forward Euro 1 month forward. 3 months forward. 6 months forward 12 months forward Swiss franc 1 month forward 3 months forwardi 6 months forward. 12 months forwardi U.S. $ equiv. Tuesday $1.9600 Currency per U.S. $ Tuesday Monday £0.5155 £0.5128 10.5102 Monday $1.9400 $1.9700 $1.9500 $1.9800 $1.9600 $1.9900 $1.9700 $2.0000 $1.9800 $1.5600 $1.5400 $1.5700 $1.5500 $1.5800 $1.5600 $1.5900 $1.5700 $1.6000 $1.5800 $0.9200 $0.9000 $0.9400 $0.9200 SPr.1.0638 $0.9600 $0.9400 SPr.1.0417 $0.9800 $0.9600 SPr.1.0204 $1.0000 $0.9800 SPr.1.0000 SFr.1.0204 SFr.1.0870 EO.5102 £0.5076 £0.5051 EO.5025 £0.5000 co.64101 €0.6369 €0.6329 €0.6289 €0.6250 £0.5076 10.5051 CO.6494 €0.6452 €0.6410 €0.6369 Co.6329 SPr.1.1111 SFr.1.0870 SFE.1.0638 SPr.1.0417

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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IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥250 million payable in three months. Currently, the spot exchange rate is #105/$ and the three-month forward rate is ¥100/$. The three-month money market interest rate is 8 percent per annum in the United States and 7 percent per annum in Japan. The management of IBM decided to use a money market hedge to deal with this yen account payable. a. Explain the process of a money market hedge and compute the dollar cost of meeting the yen obligation. b. Conduct a cash flow analysis of the money market hedge.
The treasurer of a major U.S. firm has $38 million to invest for three months. The interest rate in the United States is .55 percent per month. The interest rate in Great Britain is .59 percent per month. The spot exchange rate is £.76, and the three-month forward rate is £77. Ignore transaction costs. a. If the treasurer invested the company's funds in the U.S., how much would the investment be worth after three months? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. b. If the treasurer invested the company's funds in Great Britain, how much would the investment be worth after three months in U.S. dollars? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. a. U.S. investment b. Great Britain investment
Suppose your company imports computer motherboards from Singapore. The exchange rate is $1.3595 per Singapore dollar. You have just placed an order for 39328 motherboards at a cost to you of S146 Singapore dollars each. You will pay for the shipment when it arrives in 90 days. You can sell the motherboards for $118 each. Calculate your profit if the exchange rates goes down by 12.23% over the next 90 days. NOTE: Enter the number rounding to four DECIMALS. If your decimal answer is 0.034576
ABC Inc. has 10,000,000 Yen worth of receivables it expects to collect in 3 months’ time. To hedge its currency risk, it decided to hedge with a forward contract at a forward exchange rate of 100 Yen/US$. In 3 months’ time, the exchange rate is 105 Yen/US$. How much does ABC Inc. receive?
A bank customer will be going to London in June to purchase £100,000 in new inventory. The current spot and futures exchange rates are as follows: Exchange Rates dollars/pound Period Spot March June September December Rate 1.5342 1.6212 1.6901 1.7549 1.8416 The customer enters into a position in June futures to fully hedge her position. When June arrives, the actual exchange rate is $1.735 per pound. How much did she save? $ (Round your response to the nearest whole number.)
Manshukh
Company A (a U.S. MNC) wants to borrow £10,000,000 at a fixed rate for five year. Company B (a U.K. MNC) wants to borrow $16,000,000 at a fixed rate for five year. Today's exchange rate is £1- $1.6. The information below summarizes what each company can do without using swaps. Company A Company B $ Loans 8 10.6 £ Loans 11.6 12.4 If Company A wants to save 0.3% of the £10,000,000 loan through a Swap Bank, and If Company B wants to save 0.2% of the $16,000,000 loan through a Swap Bank. How much can the Swap bank earn on pound (£) loans (in terms of %) after meeting Company A and Company B's demand? (if your answer is 1.34%, just enter "1.34". If your answer is -1.34%, just enter"-1.34").
An investment manager based in Germany hedges a portfolio of UK gilts with a 3-month forward contract. The current spot rate is GBP0.833/EUR and the 90-day forward rate is GBP0.856/EUR. At the end of 3 months, the gilts have risen in value by -2.50% (in GBP terms), and the spot rate is now GBP0.82/EUR. What was the true cost of the forward contract? a. 11.044% annualised. b. 17287% annualised. c. 7287% annualised. d. 14.787% annualised.
Using info in the table below calculate how many USD you would have to pay 2 months from now to buy EUR 10,000 if you lock into a 2 month forward contract now. 98) Settings. 10,966 11,394 11,044 14,895 1) G10 11) All G10 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) titokb US Euro Japan UK Canada Australia ON TN Spot SN 1W 1M Switzerland 2M Denmark 3M Norway 6M Sweden N. Zealand 90) FX Markets Overview 91) FX Forwards 92) FX Options and Volatility 93) Economics 30) Forward Term Structures - Points | XDSH >> EURUSD 2) Asia 3) Europe/Africa 4) Latin America 5) Middle East 6) Metals .60 .63 1.1005 .69 -2.06 4.78 -14.26 20.22 -63.47 38.90 -128.04 56.04 -189.12 100.88 -370.08 168.84 -698.24 1Y 40) Term Structure Chart - Outrights | XCRV >> Chart 136.000000- 134.000000 132.000000- 130.000000- 128.000000 126.000000- 124.835098 124.000000 Graph terms from TOD USDJPY GBPUSD USDCAD AUDUSD NZDUSD USDCHF USDDKK USDNOK USDSEK -11.01 .31 -.22 .22 -.07 -.94 -3.83 -5.55 -5.84 -2.04 .26 -.21 .17 -.02…

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