Virginia Co . has a subsidiary in Hong Kong and in Thailand. Assume that the Hong Kong
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Question:
Virginia Co has a subsidiary in Hong Kong and in Thailand. Assume that the Hong Kong dollar HK$ is pegged at $ per Hong Kong dollar and it will remain pegged. The Thai baht fluctuates against the US dollar and is presently worth $ Virginia Co expects that during this year, the US inflation rate will be percent, the Thailand inflation rate will be percent, while the Hong Kong inflation rate will be percent. Virginia Co expects that purchasing power parity will hold for any exchange rate that is not fixed pegged Virginia Co will receive million Thai baht and million Hong Kong dollars at the end of one year from its subsidiaries.
Determine the expected amount of dollars to be received from the Thai subsidiary in one year when the baht receivables are converted to US dollars. Do not round intermediate calculations. Round your answer to the nearest dollar.
$
The Hong Kong subsidiary will send HK$ million to make a payment for supplies to the Thai subsidiary. Determine the expected amount of baht that will be received by the Thai subsidiary when the Hong Kong dollar receivables are converted to Thai baht. Do not round intermediate calculations. Round your answer to the nearest baht.
baht
Assume that interest rate parity exists. Also assume that the real oneyear interest rate in the US is while the real interest rate in Thailand is Determine the expected amount of dollars to be received by the US parent if it uses a oneyear forward contract today to hedge the receivables of million baht that will arrive in one year. Do not round intermediate calculations. Round your answer to the nearest dollar.
$
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