Electricity Company of Ghana has purchased an electric power generator from Mitsui Trading Company of Japan. ECG
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Question:
Electricity Company of Ghana has purchased an electric power generator from Mitsui Trading Company of Japan. ECG owes Mitsui ¥250 million in six months. The present spot rate is ¥250/$. The six-month forward rate is ¥248/$. ECG can borrow or invest yen at 8% and U.S. dollars at 10% (annual rates). ECG can also purchase a six-month call option on the Ghana Stock Exchange at a strike price of ¥250 for a premium of 0.004 cents per yen. Compare the alternative ways ECG can make its payment.
Which way do you recommend?
Related Book For
Operations Management Creating Value Along the Supply Chain
ISBN: 978-0470525906
7th Edition
Authors: Roberta S. Russell, Bernard W. Taylor
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