Zealand has entered into a contract to export fireworks into Singapore with delivery in three months’ time. The contract is denominated in Singapore Dollar, SGD and is valued at SGD 500 million. The current spot exchange rate is NZD/SGD 5.20. Assuming that expected
Zealand has entered into a contract to export fireworks into Singapore with delivery in three months’ time. The contract is denominated in Singapore Dollar, SGD and is valued at SGD 500 million. The current spot exchange rate is NZD/SGD 5.20. Assuming that expected
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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- A fireworks company in New Zealand has entered into a contract to export fireworks into Singapore with delivery in three months’ time. The contract is denominated in Singapore Dollar, SGD and is valued at SGD 500 million. The current spot exchange rate is NZD/SGD 5.20. Assuming that expected spot rate in three months’ time is NZD/SGD 5.15. The three-month futures contract for NZD and SGD is trading at NZD/SGD 5.10. Should the company use the futures market to hedge the exchange rate exposure? Why or why not?
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