Nyabul Limited is based in France and has recently imported raw materials from USA and has been
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Nyabul Limited is based in France and has recently imported raw materials from USA and has been invoiced for US dollars 240,000 payable in 3 months’ time. In addition, it has also exported finished goods to Japan and Australia. The Japanese customer has been invoiced for US dollars (ASD) 295, 000 payables in four months’ time. Current spot and forward rates are as follows:
Spot 0.9830 – 0.9850
3 months forward 0.9520 – 0.9525
Euro/ ASD
Spot 1.8890 – 1.8920
4 months forward 1.9510 – 1.9540
Current money market rates (p.a) are as follows
USD 10% - 12%
ASD 14% - 16%
EURO 11.5% - 13%
Show how the company can hedge its exposure to foreign exchange risk using:
- Forward Markets
- Money Markets
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