Alphabet Inc, an American multinational technology conglomerate holding company, is due to pay a German supplier...
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Alphabet Inc, an American multinational technology conglomerate holding company, is due to pay a German supplier 1,875,000 Euro in six months' time. It is now 1/2/2023. Relevant data from the foreign currency and money market is given below: Spot rate One-month forward rate Three-month forward rate Six-month forward rate Germany US June (6) September (9) Exchange rates quoted today are: Futures market (EUR62,500 contracts, margins are USD 1,000 per contract) March (3) EUR/USD 1.0500 EUR/USD 1.0620 EUR/USD 1.0700 Exercise price June 1,0500 2.45 1.65 0.80 EUR/USD 1.0340-1.0400 EUR/USD 1.0370-1.0470 EUR/USD 1.0450-1.0560 EUR/USD = 1.0480-1.0620 1,0700 1,0900 Interest rates (p.a.) are: 2.5% -4% 6%-8% Options market (62,500 EUR contracts, premiums are quoted in cents per Euro) Call option Put option September 3.40 2.68 1.89 June 0.45 1.20 2.05 September 0.97 1.80 2.78 Calculate the dollar payment using each type of hedging technique suggested by the information above and determine the best technique for the company. Alphabet Inc, an American multinational technology conglomerate holding company, is due to pay a German supplier 1,875,000 Euro in six months' time. It is now 1/2/2023. Relevant data from the foreign currency and money market is given below: Spot rate One-month forward rate Three-month forward rate Six-month forward rate Germany US June (6) September (9) Exchange rates quoted today are: Futures market (EUR62,500 contracts, margins are USD 1,000 per contract) March (3) EUR/USD 1.0500 EUR/USD 1.0620 EUR/USD 1.0700 Exercise price June 1,0500 2.45 1.65 0.80 EUR/USD 1.0340-1.0400 EUR/USD 1.0370-1.0470 EUR/USD 1.0450-1.0560 EUR/USD = 1.0480-1.0620 1,0700 1,0900 Interest rates (p.a.) are: 2.5% -4% 6%-8% Options market (62,500 EUR contracts, premiums are quoted in cents per Euro) Call option Put option September 3.40 2.68 1.89 June 0.45 1.20 2.05 September 0.97 1.80 2.78 Calculate the dollar payment using each type of hedging technique suggested by the information above and determine the best technique for the company.
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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