A New Zealand-based business has exported goods to Canada and will receive payment of CAD 620.000...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A New Zealand-based business has exported goods to Canada and will receive payment of CAD 620.000 in three months' time. The spot exchange rate and the 3-month annualised money market rate are: 1 Canadian dollar traded at NZ$1.076 3 month New Zealand money market rate: 2.83% 3 month Canadian money market rate: 1.17%. a) Explain the exchange rate risk to which New Zealand companies are exposed. b) Explain the terms of a money market hedge undertaken by the New Zealand company to fix the exchange rate of CAD 620.000. Specify the fixed forward rate provided by this hedge.. c) Assume that the actual spot exchange rate after three months is NZ$1.1200. Explain whether the forward rate is favourable to the company and assess whether it is correct to enter into a forward exchange.. A New Zealand-based business has exported goods to Canada and will receive payment of CAD 620.000 in three months' time. The spot exchange rate and the 3-month annualised money market rate are: 1 Canadian dollar traded at NZ$1.076 3 month New Zealand money market rate: 2.83% 3 month Canadian money market rate: 1.17%. a) Explain the exchange rate risk to which New Zealand companies are exposed. b) Explain the terms of a money market hedge undertaken by the New Zealand company to fix the exchange rate of CAD 620.000. Specify the fixed forward rate provided by this hedge.. c) Assume that the actual spot exchange rate after three months is NZ$1.1200. Explain whether the forward rate is favourable to the company and assess whether it is correct to enter into a forward exchange..
Expert Answer:
Answer rating: 100% (QA)
a Exchange rate risk is the risk that the value of a currency will change relative to another currency This risk is particularly relevant to New Zeala... View the full answer
Related Book For
College Mathematics For Business Economics, Life Sciences, And Social Sciences
ISBN: 978-0134674148
14th Edition
Authors: Raymond Barnett, Michael Ziegler, Karl Byleen, Christopher Stocker
Posted Date:
Students also viewed these general management questions
-
N balls labeled 1 through N are placed in Box 1 while a Box 2 is initially empty. At each time instant, one of the N balls is chosen (with equally probability) and moved to the other box. Let X [k]...
-
A physics textbook weighing 22 N rests on a desk. The coefficient of static friction between the book and the desk is μs = 0.60; the coefficient of kinetic friction is μk...
-
N sources of current with different emf's are connected as shown in Fig. 3.40. The emf's of the sources are proportional to their internal resistances, i.e. ε = aR, where a is an assigned...
-
After researching Best Buy common stock, Sally Jackson is convinced the stock is overpriced. She contacts her account executive and arranges to sell short 200 shares of Best Buy. At the time of the...
-
Condensed financial data of Sinjh Inc. follow. Additional information: 1. New plant assets costing $80,000 were purchased for cash during the year. 2. Old plant assets having an original cost of...
-
Discuss values as they relate to marketing to gay and lesbian consumers?
-
List advantages and disadvantages of the no-fault insurance system.
-
Fielder Company obtained land by issuing 2,000 shares of its $10 par value common stock . The land was recently appraised at $85,000. The common stock is actively traded at $40 per share. Prepare the...
-
1. ABC Company has two service departments (A and B) and two producing departments (X and Y). A B X Y Direct cost Php 150 Php 300 Service performed by A 40% 40% 20% Service performed by B 20% 70% 10%...
-
Given VDS = 4 V for the network of Fig. 7.93, determine: a. 1D. b. VD and VS c. VGS 12 V 4 V GS 6-3 V
-
What is shown in field 38 of the B3? 96.56 79.62 95.65 97.94 97.48
-
(a) According to standard migration theory, how will skill selection (positive versus negative) change on average as the distance between the source country and the destination country increases? (b)...
-
Several states recently passed laws restricting bargaining rights for public employees. Most notably the changes tended to restrict the unions right to negotiate over fringe benefits such as health...
-
Show that any linear combination of \(\sin \omega t\) and \(\cos \omega t\) such that \(x(t)=A_{1} \cos \omega t+A_{2}\) \(\sin \omega t\left(A_{1}, A_{2}= ight.\) constants) represents a simple...
-
The maximum amplitude and the maximum acceleration of the foundation of a centrifugal pump were found to be \(x_{\max }=0.25 \mathrm{~mm}\) and \(\ddot{x}_{\max }=0.4 \mathrm{~g}\), respectively....
-
Cindy, a tenured, full professor of French literature at a large university, is paid \($60,000.\) The university reports median salaries by gender and rank as a new initiative on faculty...
-
The two crucial elements of a company's business model are a. its proposition for satisfying shareholder expectations and its proposition for growing revenues. b. its customer value proposition and...
-
If a and b are positive numbers, find the maximum value of f ( x ) = x a (9 x ) b on the interval 0 x 9.
-
Without performing any row operations, explain why each of the matrices in Problem does not have an inverse. 1 -2. 2.
-
In Problem solve each equation for x. (Remember: e x 0 and e -x 0 for all values of x). xe - x + 7e - x = 0
-
In Problem for each polynomial function find the following: (A) Degree of the polynomial (B) All x intercepts (C) The y intercept f(x) = 5x 6 + x 4 + 4x 8 + 10
-
Rewrite the finite difference approximations developed in Problem 9 for the situation when the body has the shape of a cylindrical ring of inner and outer radii \(R_{i}\) and \(R_{o}\) and height...
-
Rewrite the approximate factorization method of Section 9.3 .3 for the case of three-dimensional heat conduction equation.
-
The two-dimensional heat equation is solved in a rectangular domain \(0
Study smarter with the SolutionInn App