X is a UK based company which has the following US $ Eransacto O ne month : Expected receipt of $240 000. One month : Expected payment of140 000. 3 months : Espected receipts of $300000, The tinanie manager has Collected the following information: Spot rate ( $per E):# 782010.0002 One month forw ard rate (4 per £): 1.7829 0.0003. 3 months forward rate ($per £):1:7846 ±o.0004 Borrowing Deposit 4.6.10 5.11 Moneyrates For x : One year sterling interest rate One year 4.9.%0 dollar interest rate Calculate the erpected stering receipts in 1month and in 3 months using the Foruward martcet. Calylate the enlpected sterling receipts in 3 months using a money market hedge and recommend whether a forwar market hedge or a money market hedge should be used. Dis cuss how Sterling curvency futures contracts could be used to hedge the 3 month dollar receipt when using currency futures, very of ten companies citunnnoi of an imperfect hedge. Explain, using Curhodae and

X is a UK based company which has the following US $ Eransacto O ne month : Expected receipt of $240 000. One month : Expected payment of140 000. 3 months : Espected receipts of $300000, The tinanie manager has Collected the following information: Spot rate ( $per E):# 782010.0002 One month forw ard rate (4 per £): 1.7829 0.0003. 3 months forward rate ($per £):1:7846 ±o.0004 Borrowing Deposit 4.6.10 5.11 Moneyrates For x : One year sterling interest rate One year 4.9.%0 dollar interest rate Calculate the erpected stering receipts in 1month and in 3 months using the Foruward martcet. Calylate the enlpected sterling receipts in 3 months using a money market hedge and recommend whether a forwar market hedge or a money market hedge should be used. Dis cuss how Sterling curvency futures contracts could be used to hedge the 3 month dollar receipt when using currency futures, very of ten companies citunnnoi of an imperfect hedge. Explain, using Curhodae and

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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Concept explainers

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.

Question

X is a UK based company which has the following US $ Eransacto
O ne month : Expected receipt of $240 000.
One month : Expected payment of140 000.
3 months : Espected receipts of $300000,
The tinanie manager has Collected the following information:
Spot rate ( $per E):# 782010.0002
One month forw ard rate (4 per £): 1.7829 0.0003.
3 months forward rate ($per £):1:7846 ±o.0004
Borrowing
Deposit
4.6.10
5.11
Moneyrates For x :
One year sterling interest rate
One
year
4.9.%0
dollar interest rate
Calculate the erpected stering receipts in 1month and in
3 months using the Foruward martcet.
Calylate the enlpected sterling receipts in 3 months using
a money market hedge and recommend whether a forwar
market hedge or a money market hedge should be used.
Dis cuss how Sterling curvency futures contracts could be
used to hedge the 3 month dollar receipt
when using currency futures, very of ten companies
citunnnoi of an imperfect hedge. Explain, using
Curhodae and

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* is a UK based company which has the Following Us$ transactio O ne month : Expected receipt of $240 00. One month : Expected payment of 140000. 3 months : Epected receipts of $300 000, The finanle manager has cOllected the following information: Spot rate C $per E):# 1:782010.0002 One month forw ard rate (4 per £): 1.7829$0.0003. 3 months forward rate ($ per £):1:7846 ± o.0004 Borrowing 4.9°10 Deposit Moneyrates For x : One year sterling interest rate One year dollar interest rate Calculate the erpected sterting receipts in Imonth and in
A firm sells the same material with two separate payment plans.1. According to the 1st payment plan, the payment period is 12 months, each monthly payment is 10.837.000 TL, and an interim payment of 12 million TL is required at the end of the 6th month.2. In the 2nd payment plan, the payment period is 18 months, each monthly payment is 7.965.000 TL and an interim payment of 36 million TL is required at the end of the 12th month. Annual nominal interest rate for both options is 60%. Which payment plan would you recommend? In payments, discrete compound interest is applied.
A firm sells the same material with two separate payment plans.1. According to the 1st payment plan, the payment period is 12 months, each monthlypayment is 10 837 000 TL, and an interim payment of 12 million TL is required at the end of the 6th month.2. In the 2nd payment plan, the payment period is 18 months, each monthly payment is 7 965 000 TL and an interim payment of 36 million TL is required at the end of the 12th month. Annual nominal interest rate for both options is 60%. Which payment plan would you recommend? In payments, discrete compound interest is applied
A firm sells the same material with two separate payment plans.1. According to the 1st payment plan, the payment period is 12 months, each monthly payment is 10 837 000 dollars, and an interim payment of 12 million dollars is required at the end of the 6th month.2. In the 2nd payment plan, the payment period is 18 months, each monthly payment is 7 965 000 dollars and an interim payment of 36 million dollars is required at the end of the 12th month. Annual nominal interest rate for both options is 60%. Which payment plan would you recommend? In payments, discrete compound interest is applied.
Use 360 days in a year. Solutions must be complete (including formulas). Present rates in percent and rounded off to five decimal places (e.g. 35.66667 for 35.666666%). Round off days to two decimal places. . DF has total forecasted gross purchases of P4,500,000 relating to a major supplier for the coming year. The supplier is offering a credit term of 3/15, n/45. 1. How much is the simple annual effective cost of paying on the 45th day?
ABC is asked to quote a price in Jamaican dollars for computer sales to a Jamaican company. The computers will be paid for in four equal, quarterly installments, beginning 90 days from now. ABC requires a minimum price of $2.5 million to accept this contract. Suppose the spot and forward rates for the J$ are as follows: Spot 90-Day 180-Day 270-Day 360-Day $0.0307 $0.0302 $0.0298 $0.0293 $0.0287 What is the minimum J$ price that ABC should quote for this order? a. J$ 87,108,014 b. J$ 82,781,457 c. J$ 84,745,763 d. J$ 81,433,225
The EUR/USD quotes 1.1295-1.1305 and you implement a long position for 100,000 €. 2 days later the EUR/USD shows 1.1431-1.1441. What is your P&L? a)1260 $ b)1460 $ c)1260 € d)1460 €
The cost of product X is 30 percent of its selling price, and the carrying cost is 8 percent of selling price. Accounts are paid on average 60 days after sale. Sales per month average P25,000. What is the investment in accounts receivable? choose the letter of the correct answera. P8,000.00b. P9,000.00c. P19,000.00d. P29,000.00e. P39,000.00
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