ASML (Dutch company) sold a system to INTEL, a US company, and invoiced 45 million euros payable
Question:
ASML (Dutch company) sold a system to INTEL, a US company, and invoiced 45 million euros payable in six months.
• The current spot rate is US $ 1.10 per euro and at this time the six-month forward rate is US $ 1.08 per euro. AMSL can buy a six-months put option on US dollars with a strike price of 0.91 euro per dollar for a premium of 0.02 euro per US dollar.
• The 180-day borrowing and lending rates in the euro zone are 2.5 and 2.1 percent, respectively, on an annualized basis.
• The 180-day borrowing and lending rates in the US are 2.2 and 1.9 percent, respectively, on an annualized basis.
If Intel decides to hedge using money market instruments (= money market hedge) to manage its currency risk, what would be the guaranteed euro proceeds from the purchase in this case?
Expert Answer:
To determine the guaranteed euro proceeds from the purchase using a money market hedge we need to ca... View the full answer
