Suppose that you are the treasurer of IBM with an extra US$1,000,000 to invest for six months. You are considering the purchase of U.S. T-bills that yield 1.810% (that's a six month rate, not an annual rate by the way) and have a maturity of 26 weeks. The spot exchange rate is $1.00 = ¥100, and the six month forward rate is $1.00 = ¥110. The interest rate in Japan (on an investment of comparable risk) is 13 percent. What is your strategy? Take S1m, invest in U.S. T-bills. Take S1m, translate into yen at the spot, invest in Japan, and repatriate your yen earnings back into dollars at the spot rate prevailing in six months. Take S1m, translate into yen at the spot, invest in Japan, hedge with a short position in the forward contract. Take S1m, translate into yen at the forward rate, invest in Japan, hedge with a short position in the spot contract.

Q: alternate answer?

A: Yield to Maturity (YTM):Yield to Maturity (YTM) is the total return anticipated on a bond if it is…

Q: Answer and working out are not correct, can you try again

A: In finance, a forward rate denotes an agreed-upon interest or exchange rate set today for a future…

Q: Give two examples of errors of principle?

A: Errors of principle refers to errors that are carried out at time of noting down transactions…

Q: State the criticism of MM approach.

A: The Markowitz Model (MM), developed by Harry Markowitz in 1952, is a mathematical model that seeks…

Q: Student ID Day 63638034 Monday 23957096 Thursday 28080825 Monday Exam Score 61 70 1. How many…

A: =COUNTIF is used to count the cells satisfying the given criteria in the given range.

Q: The answer provided is not correct, please provide the correct value

A: Free Cash Flow Free Cash flow which can be determined by using the amount of net operating cash flow…

Q: o the problem please i need a red

A: Molding FabricationMachine Hours 2,500.00 1,500.00Fixed Manufacturing Overhead cost  $    13,000.00…

Q: can you do it again,please, it is not correct

A: Initial investment = 12,000Nominal rate of interest for first 5 years = 3.7% compounded…

Q: The solution above is incorrect. Would you be able to fully solve it, please? I have difficulty…

A: a) If LAB is organized LLCAnnual return before taxes = $660,000 x 13%…

Q: please display your formula used in your work

A: Monthly payment refers to the payment amount for the loan grounded on the constant payments as well…

Q: Which ways can a decision tree be presented to help lay out the sequence of decisions that can be…

A: Graphical representation:- In this format, nodes and branches are used to visually represent the…

Q: Explain the purpose of IFRS for SMEs and how it differs from full IFRS.

A: IFRS or International Financial Reporting Standards are the guidelines of accounting given by the…

Q: Briefly describe the NBBO and the order protection rule. Whatregulation implemented them?

A: NBBO is a securities exchange commission regulation that requires brokers to trade at the best…

Q: it is still incorrect, please find correct answer

A: Accounts receivable is amount that is yet to be recovered from the customers to whom goods or…

Q: Give two examples of errors of commission?

A: Accounting error: Accounting errors can be defined as omission of the fundamental accounting…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.