Apex Manufacturing Co. has sold a numerically controlled milling machine to a firm in Britain and will
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- Apex Manufacturing Co. has sold a numerically controlled milling machine to a firm in Britain and will receive payment of 3 m in 90 days. The spot rate is $1.2780/ and the 90 day forward rate is $1.2675/. The FX advisor at the firm's bank in Chicago forecasts that the rate will be $1.3000/ in 90 days. Interest rates (invest/borrow) are 2.0%/4.8% pa in the U.K. and 1.0%/4.0% pa in the U.S. The bank also offers a 90 put option on the pound with a strike of $1.2800/ and a premium of 3%. Calculate the different hedging alternatives for the firm and make a recommendation.
Related Book For
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
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