A company will receive 250,000 [GBP] in December. They are debating whether to enter into a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A company will receive 250,000 [GBP] in December. They are debating whether to enter into a three months future contract or do a synthetic forward. ● ● If the company decides to use futures contracts, how many contracts do they need to use? Is it best for the company to do a synthetic forward or enter into a futures contract? In order to decide the best option, you need to find the value of the December futures contract for British Pounds, the spot exchange rate for British Pounds, and the yield of the three month U.S. Treasury bill. The three month Treasury bill issued by the Bank of England have a yield of 5.25 percent per year. Another company have to pay 25 million Japanese Yen in December. • Should they enter into a futures contract for December or do a synthetic forward? If it is best to use Futures contracts, how many contracts should they use? • In order to decide what is best you need the December futures for Japanese Yen, the spot exchange rate for Japanese Yen, and the yield of the three month U.S. Treasury bill. The three month Treasury bill issued by the Bank of Japan have a yield of 0.73 percent per year. The futures contracts settlement prices are in the CME Daily Bulletin (PG07), the spot rates in Oanda, and the U.S. treasury bill yields in the Treasury Department or Yahoo Finance. 5,52 Present a report with your calculations for both cases and the recommendations on what is the best option for each of the cases. 1-2061 A company will receive 250,000 [GBP] in December. They are debating whether to enter into a three months future contract or do a synthetic forward. ● ● If the company decides to use futures contracts, how many contracts do they need to use? Is it best for the company to do a synthetic forward or enter into a futures contract? In order to decide the best option, you need to find the value of the December futures contract for British Pounds, the spot exchange rate for British Pounds, and the yield of the three month U.S. Treasury bill. The three month Treasury bill issued by the Bank of England have a yield of 5.25 percent per year. Another company have to pay 25 million Japanese Yen in December. • Should they enter into a futures contract for December or do a synthetic forward? If it is best to use Futures contracts, how many contracts should they use? • In order to decide what is best you need the December futures for Japanese Yen, the spot exchange rate for Japanese Yen, and the yield of the three month U.S. Treasury bill. The three month Treasury bill issued by the Bank of Japan have a yield of 0.73 percent per year. The futures contracts settlement prices are in the CME Daily Bulletin (PG07), the spot rates in Oanda, and the U.S. treasury bill yields in the Treasury Department or Yahoo Finance. 5,52 Present a report with your calculations for both cases and the recommendations on what is the best option for each of the cases. 1-2061
Expert Answer:
Answer rating: 100% (QA)
Case 1 Company Receiving 250000 GBP in December Futures Contract Calculate the value of the December futures contract for British Pounds Spot Exchange ... View the full answer
Related Book For
Financial Accounting and Reporting a Global Perspective
ISBN: 978-1408076866
4th edition
Authors: Michel Lebas, Herve Stolowy, Yuan Ding
Posted Date:
Students also viewed these finance questions
-
Accessibility tab summary: The financial information of Amfusia Software are presented in rows 4 to 11. A statement for Net Income for 2021 Dividends for 2021 Total Assets December 31, 2021 Common...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
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...
-
What are the energies of the two longest-wavelength lines in the Paschen series for hydrogen? What are the corresponding wavelengths? Give your answers to two significant figures.
-
A researcher develops an advertisement aimed at increasing how much the public trusts a federal organization. She asks participants to rate their level of trust for the organization before and after...
-
Consider an exponential compound Poisson process of the form \[S_{t}=S_{0} \mathrm{e}^{\mu t+\sigma B_{t}+Y_{t}}, \quad t \geqslant 0\] where \(\left(Y_{t} ight)_{t \in \mathbb{R}_{+}}\)is a compound...
-
The first volume of the Accountant's Index listed forensic-type articles under which categories?
-
Activity-based costing, service company Quikprint Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Quikprint classifies its various printing jobs as...
-
Current Attempt in Progress At December 31, 2021, Wildhorse Co. reported this information on its balance sheet. Accounts receivable $633,000 Less: Allowance for doubtful accounts 41,000 During 2022,...
-
2. A double-spool turbofan engine is used to power an aircraft flying at speed of 250 m/s at an altitude of 11,000 m, where ambient temperature is -50C and pressure is 22.7 kPa. As shown below, the...
-
Moab... Moab Inc. manufactures and distributes high-tech biking gadgets. It has decided to streamline some of its operations so that it will be able to be more productive and efficient. Because of...
-
During the current pandemic, demand for health equipment is increasing. For this reason, the Prima company plans to increase profits through efforts to manage their inventory. If it is known that the...
-
Compware Ltd makes three products, all of which use the same machine which is available for 30,000 hours per period. The standard costs of the products per unit are as follows Products RST Rs.RsRs....
-
Strike Company incurs about $430,000 in manufacturing overhead costs each month. The company works about 100,000 direct labor hours (DLH) per month, so the average overhead per DLH is $4.30. The...
-
On January 1, 2019, Naga Company issued 3-year bonds with a face amount of P1,200,000 and stated interest rate of 8% per year payable annually on December 31. The bonds were acquired to yield 10%....
-
Discuss the Corporate Social Performance (CSP) for Dairy Queen Inc, and a mom-and-pop ice cream shop. What are these companies doing to be socially responsible?
-
Facts: Diversified Industries has been owned by the Gray family for three generations. The Gray family has received an offer from a large public company to buy Diversified Industries. The sale price...
-
The ultimate goal of Google, Bing, and other consumer search engines is to provide users with search listings that contain useful information on the topic of their search. What recommendations would...
-
On the Internet, or in the library, find the annual reports of four companies from different sectors of activity in a given country or in different countries. Required 1. How are liabilities...
-
Stora Enso is a Finnish integrated global paper producer. Its sales have varied significantly over the past four years. The Group had, in 2011, some 30,000 employees in more than 35 countries...
-
Multiple Choice Questions Raw materials and merchandise purchased can be included in (two possible alternative answers) (a) Cash (b) Expenses (c) Fixed assets (d) Current assets (e) None of these 2...
-
1. Benzaquin had a radio talk show in Boston. On the program, he complained about an incident earlier in the day, in which state trooper Fleming had stopped his car, apparently for lack of a proper...
-
3. Fifteen-year-old Terri Stubblefield was riding in the back seat of a Ford Mustang II when the car was hit from behind. The Mustang was engulfed in a ball of fire, and Terri was severely burned....
-
2. Caldwell, carrying a large purse, was shopping in a K-Mart store. A security guard observed her look at various small items such as stain, hinges, and antenna wire. On occasion she bent down out...
Study smarter with the SolutionInn App