BP plc is an UK company with export and import trade with the US. The following...

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BP plc is an UK company with export and import trade with the US. The following transactions are due within the next three months. Transactions are in the currency specified. Purchases of components, cash payment due in three months: $100,000. Sale of finished goods, cash receipt due in three months: $40,000. Exchange rates (London market) Spot 1.7106-1.7140 Three months forward 1.7000-1.7080 Six months forward 1.6960-1.6980 Interest rates Three months or six months Sterling 12% 8% Dollars 9% 6% $/£ Borrowing Lending Required Calculate the net sterling receipts and payments that BP plc might expect for both its three-month transactions if the company hedges foreign exchange risk on: (a)The forward foreign exchange market (b) The money market BP plc is an UK company with export and import trade with the US. The following transactions are due within the next three months. Transactions are in the currency specified. Purchases of components, cash payment due in three months: $100,000. Sale of finished goods, cash receipt due in three months: $40,000. Exchange rates (London market) Spot 1.7106-1.7140 Three months forward 1.7000-1.7080 Six months forward 1.6960-1.6980 Interest rates Three months or six months Sterling 12% 8% Dollars 9% 6% $/£ Borrowing Lending Required Calculate the net sterling receipts and payments that BP plc might expect for both its three-month transactions if the company hedges foreign exchange risk on: (a)The forward foreign exchange market (b) The money market

Answer rating: 100% (QA)

Net Cash payment after 3 months 1 Forward Exchange Market Need to buy Applicable Rake Outfl... View the full answer