Suppose PepsiCo hedges a ¥1 billion dividend it expects to receive from its Japanese subsidiary in 90 days with a forward contract. The current spot rate is ¥150/$1 and the 90-day forward rate is ¥149/$1. If the spot rate in 90 days is ¥154/$, how much has this forward market hedge cost PepsiCo? a) $173,160 b) $44,743 c) Pepsi gains $173,160 from the forward contract d) Pepsi gains $217,903 from the forward contract
Suppose PepsiCo hedges a ¥1 billion dividend it expects to receive from its Japanese subsidiary in 90 days with a forward contract. The current spot rate is ¥150/$1 and the 90-day forward rate is ¥149/$1. If the spot rate in 90 days is ¥154/$, how much has this forward market hedge cost PepsiCo? a) $173,160 b) $44,743 c) Pepsi gains $173,160 from the forward contract d) Pepsi gains $217,903 from the forward contract
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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Suppose PepsiCo hedges a ¥1 billion dividend it expects to receive from its Japanese
subsidiary in 90 days with a forward contract. The current spot rate is ¥150/$1 and the 90-day
forward rate is ¥149/$1. If the spot rate in 90 days is ¥154/$, how much has this forward market
hedge cost PepsiCo?
a) $173,160
b) $44,743
c) Pepsi gains $173,160 from the forward contract
d) Pepsi gains $217,903 from the forward contract
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