A U.S. company has committed to pay 10 million kronor to a Swedish company in one year. What is the cost (in present value) of covering this liability by buying kronor forward? The Swedish interest rate is 1.2%,Exchnage rate is in the table ### Exchange Rates for Selected European Currencies#### IntroductionThe table below provides the spot rate and forward rates for various European currencies, including the Euro (EUR), Czech Republic koruna (CZK), Hungarian forint (HUF), Polish zloty (PLN), Russian ruble (RUB), and Swedish krona (SEK). The forward rates are provided for three different periods: 3 months, 6 months, and 1 year.#### Exchange Rates Table| Country (Currency) | Abbreviation | Spot Rate | Forward Rates ||--------------------------|--------------|-----------|-------------------------|| | | | 3 Months | 6 Months | 1 Year || **Europe:** | | | | | || Euro | EUR or € | 1.1758 | 1.1800 | 1.1845 | 1.1916 || Czech Republic (koruna) | CZK | 21.853 | 21.605 | 21.549 | 21.388 || Hungary (forint) | HUF | 267.28 | 265.703 | 264.438 | 261.520 || Poland (zloty) | PLN | 3.5773 | 3.5691 | 3.5668 | 3.5618 || Russia (ruble) | RUB | 58.879 | 59.453 | 60.205 | 61.501 || Sweden (krona) | SEK | 8.4976 | 8.4388 | 8.3886 | 8.2836 |#### Explanation- **Spot Rate:** The current exchange rate at which one currency can be immediately exchanged for another.- **Forward Rates:** The agreed-upon exchange rates for the currency pairs to be exchanged at future dates (3 months, 6 months, and 1 year).#### Highlights:- **Euro (EUR or €):** - Spot Rate: 1.1758 - 3 Months: 1.1800 - 6 Months: 1.1845 - 1 Year: 1.191

Compute cost of covering of liability to pay Swedish kronor to a Swedish company after one year by…

Answered: Sweden (krona) SEK 8.4976 8.4388 8.3886…

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Sweden (krona) SEK 8.4976 8.4388 8.3886 8.2836

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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Question

A U.S. company has committed to pay 10 million kronor to a Swedish company in one year. What is the cost (in present value) of covering this liability by buying kronor forward? The Swedish interest rate is 1.2%,

Exchnage rate is in the table

### Exchange Rates for Selected European Currencies

#### Introduction
The table below provides the spot rate and forward rates for various European currencies, including the Euro (EUR), Czech Republic koruna (CZK), Hungarian forint (HUF), Polish zloty (PLN), Russian ruble (RUB), and Swedish krona (SEK). The forward rates are provided for three different periods: 3 months, 6 months, and 1 year.

#### Exchange Rates Table

| Country (Currency) | Abbreviation | Spot Rate | Forward Rates |
|--------------------------|--------------|-----------|-------------------------|
| | | | 3 Months | 6 Months | 1 Year |
| **Europe:** | | | | | |
| Euro | EUR or € | 1.1758 | 1.1800 | 1.1845 | 1.1916 |
| Czech Republic (koruna) | CZK | 21.853 | 21.605 | 21.549 | 21.388 |
| Hungary (forint) | HUF | 267.28 | 265.703 | 264.438 | 261.520 |
| Poland (zloty) | PLN | 3.5773 | 3.5691 | 3.5668 | 3.5618 |
| Russia (ruble) | RUB | 58.879 | 59.453 | 60.205 | 61.501 |
| Sweden (krona) | SEK | 8.4976 | 8.4388 | 8.3886 | 8.2836 |

#### Explanation
- **Spot Rate:** The current exchange rate at which one currency can be immediately exchanged for another.
- **Forward Rates:** The agreed-upon exchange rates for the currency pairs to be exchanged at future dates (3 months, 6 months, and 1 year).

#### Highlights:
- **Euro (EUR or €):**
- Spot Rate: 1.1758
- 3 Months: 1.1800
- 6 Months: 1.1845
- 1 Year: 1.191

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