As a MNC you will need to remit money to your home country or hedge your payable:

Explain how the MNC could utilize the spot market to facilitate the exchange of currencies. Be specific.

Explain how the MNC is exposed to exchange rate risk and how it could use the forward market, options, or money market to hedge this risk.

Assume the MNC has an outstanding payment of $100,000 to your host country and a cash flow of $200,00 for the host country. Using all three hedging strategies to determine the most effective strategy. Show all working. Use each country's current lending, deposit, spot, and forward rate. To find the forward rate you will need to visit a bank's website. State the currency of your host country and provide evidence of the rates in your project. 

Determine the number of dollars the MNC will receive using each strategy

Determine the number of dollars needed to pay the payable using each strategy

Select the strategy that you prefer based on the information your results.

Answer rating: 100% (QA)

Utilizing the spot market The MNC can use the spot market to exchange currencies by purchasing or selling foreign currency at the current spot rate The spot rate is the exchange rate at which currenci... View the full answer