Question: ABC is expecting to receive $200,000 in 6 months' time and wants to hedge its exposure using a money market hedge. The current spot

ABC is expecting to receive $200,000 in 6 months' time and wants

ABC is expecting to receive $200,000 in 6 months' time and wants to hedge its exposure using a money market hedge. The current spot rate is 1.65 $/. It can borrow dollars at an annual rate of 6.5% and deposit sterling at an annual rate of 5.3% How much will ABC expect to have in sterling from the above hedge 6 months from now?

Step by Step Solution

★★★★★

3.39 Rating (155 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Frank Knight, a famous economist, was well-known for saying It aint ignorance that does the most damage; its knowing so derned much that aint so. If the myths listed above are not, in fact, true,...

In early April, a U.S. Company is expecting to receive 1,250,000 Euros in June from its European customers, and wants to hedge against a fall in the value of the Euro relative to the U.S. dollar in...

A French firm is expecting to receive JPY 10.4 million in 90 days as a result of an export sale to a Japanese semiconductor firm. What will it cost, in total, to purchase an option to sell the yen at...

The current spot rate between the U.S. dollar and the Swedish krona is $1 = 6.5228 krona. If the inflation rate in the United States is 4 percent and in Sweden is 2 percent, then what is the expected...

Cece Cao trades currencies for Sumatra Funds in Jakarta. She focuses nearly all of her time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $0.6000/S$....

Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After...

You are a financial adviser to a U.S. corporation that expects to receive a payment of 60 million Japanese yen in 180 days for goods exported to Japan. The current spot rate is 100 yen per U.S....

How would you expect the actual rate of unemployment to compare with the natural rate of unemployment in the following cases? a. Prices are stable and have been stable for the last four years. b. The...

How do purchasing-power parity, interest rate parity, and the International Fisher Effect explain the relationships among the current spot rate, the future spot rate, and the forward rate?

would like help answering these, due thursday evening FI 3300 Online Take Home Problem Set 4 Spring 2016 Directions: This problem set covers chapters 8, 9 and 10 in the textbook. Determine or compute...

5 Could Blades modify the timing of the Thai imports in order to reduce its transaction exposure? What is the tradeoff of such a modification? Blades plc has recently decided to expand its...

The degree of operating leverage for Dousmann Corp. and PCB Co. are 1.4 and 5.6, respectively. Both have net incomes of $50,000. Determine their respective contribution margin s.

What does the law of diminishing returns imply for the shape of the marginal cost curve?

Find the value of a in each of the following. a b x + 1 is a factor of 6x + 27x + ax+8 x+7 is a factor of x-5x-6x+a c 2x+3 is a factor of 4x + ax+ 29x+30

6. The probability that a driver must stop at any one traffic light coming to Lincoln University is 0.2. There are 15 sets of traffic lights on the journey. (a) What is the probability that a student...

"Depreciation and Cost Recovery" Please respond to the following: Imagine that your client is leasing business vehicles. Examine the rules for claiming deductions for business vehicles. Next,...

Discuss the role of distribution channels in bridge the gap between the producer of a product and its user. Suggest a framework that can help the management of a multinational company to analyse its...

Question 10 Determine the Langmuir constants a for the adsorption of benzene on activated carbon, given the following isotherm data. PC6H6 kPa W, kg C6H6/kg carbon 0.027 0.129 0.067 0.170 0.133 0.204...

Which of the following should be taken into consideration when determining where to build a facility? Group of answer choices demographics duration and frequency of the event perception of quality...

Question 1 You are expecting a project to produce the following cash flows for years 1 through 4 respectively: $1,705, $1,691, $1,882, $1,407. If the appropriate discount rate is 12 percent, how much...

You are expecting a project to produce the following cash flows for years 1 through 4 respectively: $1,551, $1,519, $1,048, $1,234. If the appropriate discount rate is 8 percent, how much would you...

7 The Good Life Insurance Co. wants to sell you an annuity which will pay you $827 per quarter for 24 years. You want to earn a minimum rate of return of 9.92 percent APR. What is the most you are...

The ABC Company assembles and sells a product called an "A." The "A" is made up of two units of a subassembly called "E" and three units of a material called "D" ("D" is purchased from a supplier),...

7 The Good Life Insurance Co. wants to sell you an annuity which will pay you $827 per quarter for 24 years. You want to earn a minimum rate of return of 9.92 percent APR. What is the most you are...