Considering the following data, explain how you would build a synthetic forward for a US importer...
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Considering the following data, explain how you would build a synthetic forward for a US importer of Chinese toys who has to pay 1 million yuans 6 months from now. Which would be the cost in terms of dollars for the importing firm? • spot rate yuan 7.10/$; • 6-month forward rate yuan 6.90/$; • 6-month Chinese interest rate 3.45% per annum; 6-month US interest rate 5.09% per annum. Considering the following data, explain how you would build a synthetic forward for a US importer of Chinese toys who has to pay 1 million yuans 6 months from now. Which would be the cost in terms of dollars for the importing firm? • spot rate yuan 7.10/$; • 6-month forward rate yuan 6.90/$; • 6-month Chinese interest rate 3.45% per annum; 6-month US interest rate 5.09% per annum.
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To hedge against currency risk the US importer can enter into a forward contract to lock in a future ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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