An importer has a payment of 8 million due in 90 days. a. If the 90 day

Question:

An importer has a payment of £8 million due in 90 days.
a. If the 90 day pound forward rate is $1.4201, what is the hedged cost of making that payment?

b. If the spot rate expected in 90 days is $1.4050, what is the expected cost of payment?

c. What factors will influence the hedging decision?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Foundations Of Multinational Financial Management

ISBN: 9780470128954

6th Edition

Authors: Alan C Shapiro, Atulya Sarin

See More Books

Question Posted: Dec 09, 2023 04:21 AM

See More Questions

Cooper Inc., a U.S. firm, has just invested 500,000 in a note that will come due in 90 days and is yielding 9.5% annualized. The current spot value of the pound is $1.5612, and the 90-day forward...
Cooper Inc., a U.S. firm, has just invested 500,000 in a note that will come due in 90 days and is yielding 9.5% annualized. The current spot value of the pound is $1.9612 and the 90-day forward rate...
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
A home buyer bought a house for $245,000. The buyer paid 20 percent down but decided to finance closing costs of 3 percent of the mortgage amount. If the borrower took out a 30-year fixed-rate...
Determining cash flows from financing activities On January 1, 2011, Parker Company had a balance of $120,000 in its Common Stock account. During 2011, Parker paid $18,000 to purchase treasury stock....
Stand-alone revenue allocation. MaxSystems, Inc., sells computer hardware to end consumers. Its most popular model, the CX30 is sold as a ??bundle,?? which includes three hardware products: a...
The classic Goodyear blimp is essentially a helium balloon a big one, containing 5700 m 3 of helium. If the envelope and gondola have a total mass of 4300 kg, what is the maximum cargo load when the...
Select the best answer. 1. A local chapter of the Society for Protection of the Environment beneted from the voluntary services of two attorneys. One served as a member of the Society's board of...
Let the initial capital be $ 9,000, and the annual interest rate 3%. How much is the principal after 12 years if the interest period is 3 years?
Walt Disney expects to receive a Mex$16 million theatrical fee from Mexico in 90 days. The current spot rate is $0.0915/Mex$ and the 90-day forward rate is $0.0903/Mex$. a. What is Disneys peso...
Instead of its previous policy of always hedging its foreign currency receivables, Sun Microsystems has decided to hedge only when it believes the dollar will strengthen. Otherwise, it will go...
Which of the following transactions would typically not be reported in a county's General Fund? a. The purchase of 10 new public safety vehicles. b. The annual lease payment for the copiers in the...
Compliance Case II: In re: to McDonald's Corporation Stockholder Derivative Litigation, Del. 289 A.3d 343 (2023) Defendant David Fairhurst served as Executive Vice President and Global Chief People...
Evaluate the following statements: 1. The practice of comparing a company with its prior performance or with best practices from other companies is called benchmarking. 2. Participative budgeting are...
In the absence of an exchange market for a specific foreign currency, what additional disclosure is required by the entity, as per the information provided?
What emerging technologies and methodologies are advancing our understanding of mitochondrial biology, including single-cell analysis, super-resolution microscopy, and genome editing tools targeting...
4. Consider the market for pie. For each of the following scenarios, do the following: a. State which curve will shift and in which direction. b. Explain why the curve shifted. c. Indicate what will...
Olga has to travel to Philadelphia for 2 days on business. She enjoys history and is planning to visit the Liberty Bell and other historic sites in the city. If time permits, she would like to make a...
Consider a closed, rigid tank with a volume of 0.8L, filled with cold water initially at 27C. The tank is filled such that there are no voids (air pockets) within. The initial pressure within the...
Don Ball is a 55-year-old engineer. According to mortality tables, a male at age 55 has an average life expectancy of 21 more years. In prior years, Don has accumulated $48,500 including interest,...
Jean invests $100 in Year 1 and doubles the amount each year after that (so the investment is $100, 200, 400,800.) If she continues to do this for 10years, and the investment pays 10% annual...
If you invested $2500 in a bank 24-month certificate of deposit paying 8.65%, compounded monthly, what is the future worth of the certificate of deposit when it matures in 2 years?
The Wagner Corporation has a $29 million bond obligation outstanding, which it is considering refunding. Though the bonds were initially issued at 16 percent, the interest rates on similar issues...
Given that you observe the following rates today for U.S Treasury debts, estimate the one-year forward rate one year from now (Plain English: Right now, I see that I can get 5.452% if I invest in a...
You may use Excel or other spreadsheet software to answer this question. However, you should write out the general formulas that you use to obtain your results and explain. An individual wants to...

An importer has a payment of 8 million due in 90 days. a. If the 90 day

Question:

Step by Step Answer:

a The hedged cost of making the payment is 11360800 8000000 1420...View the full answer

Foundations Of Multinational Financial Management

Students also viewed these Business questions