ABC Limited, is an exporter from UK. His receivables on account of exports to Canada are...

 

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ABC Limited, is an exporter from UK. His receivables on account of exports to Canada are Can $ 5,00,000 which are due in 6 months. ABC wants to hedge is export receivable in Forward Market. The following information is available to you. Spot Exchange Rate - Can $ 2.5/1 GBP Interest Rates in UK 12% Interest Rates in Canada 15% The forward rates truly reflect the interest rates differential. Find out the Gain / Loss to ABC Limited, if Can 5 spot rates declines by 2% I) ii) gains by 4% or remains unchanged over next 6 months ABC Limited, is an exporter from UK. His receivables on account of exports to Canada are Can $ 5,00,000 which are due in 6 months. ABC wants to hedge is export receivable in Forward Market. The following information is available to you. Spot Exchange Rate - Can $ 2.5/1 GBP Interest Rates in UK 12% Interest Rates in Canada 15% The forward rates truly reflect the interest rates differential. Find out the Gain / Loss to ABC Limited, if Can 5 spot rates declines by 2% I) ii) gains by 4% or remains unchanged over next 6 months

Answer rating: 100% (QA)

ANSWER To solve this problem we need to find the forward exchange rate and then calculate the gain o... View the full answer