Question
What is the money market hedge? Todays date: 14 February Repatriation of EUR 3.5 million on 18 September The company has an agreement to buy
What is the money market hedge?
Today’s date: 14 February
Repatriation of EUR 3.5 million on 18 September
The company has an agreement to buy 300,000 computer chips at Yen9000 each on a semi-annual basis, with payment due on 15th June. Interest rates are annualised, the actual number of days in the hedging period need to be considered (no of days/360). You can borrow in the Eurocurrency market at LIBOR + 1%
| Euro Money Market Rates | ||||
| BID | ASK | |||
| EUDRG | 7mo | 19:59 | 1.3500 | 1.4100 |
| Japanese Money Market Rates | ||||
| BID | ASK | |||
| 4 months | 0.1820 | 2420 | ||
| USD Money Market Rates | ||||
| BID | ASK | |||
| USD Depo | 4mo | 0.5700 | 0.6300 | |
| USD Depo | 7mo | 0.7850 | 0.8350 | |
Step by Step Solution
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The money market hedge is a technique used to hedge foreign currency risk by taking advantage of the interest rate differential between two currencies ...
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Practical Management Science
Authors: Wayne L. Winston, Christian Albright
5th Edition
1305631540, 1305631544, 1305250907, 978-1305250901
