Problem 10-7 (algorithmic) Question Help Krystal. Krystal is a U.S.-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to ther City of Nagasaki, Japan, for installation in Nagasaki's famous Glover Gardens (where Puccini's Madame Butterfly waited for the return of Lt. Pinkerton). The sale was priced in yen at 30,000,000, with payment due in three months. The exchange rate and interest rate data are shown in the popup window: Note that the interest rate differentials vary slightly from the forward discounts on the yen because of time differences for the quotes. The spot 118.103/S, for example, is a mid-point range. On April 11, the spot yen traded in London from 118.622/$ to 117.584/. Krystals Japanese competitors are currently borrowing yen from Japanese banks at a spread of two percentage points above the Japanese money rate. Krystal's weighted average cost of capital is 15.5%, and the company wishes to protect the dollar value of this receivable. 3-month options are available from Kyushu Bank: call option on 30,000,000 at exercise price of V118.000/S: a 1.3% premium; or a put option on 30,000,000, at exercise price of 118.000/S: a 3.3 % premium. a. How much in U.S. dollars will Krystal receive in 3 months without a hedge if the expected spot rate in 3 months is assumed to be V118.103/$? (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer. 5 parts remaining Clear Al Check Answer Uber Presentati....pp... Show All X NOV 14 tv A is a U.S.-base , Japan, for ins in yen at 30,0 Data Table company sold a system he return of Lt. Pinkertc n in the popup window erest rate differ mid-point rang om Japanese b ompany wishe Spot exchange rate: 1-month forward rate: 118.103/$ (closing mid-rates) *117.621/S , a 4.92 % per annum premium *116.677/S, a 4.89 % per annum premium 112.519/S, a 4.96% per annum premium Click on the icon located on the top-right comer of the data table in order to uotes. The spot 118. ese competitors are ca d average cost of capit 3-month forward: 1-year forward: are available fr exercise price h; or a put option on copy its contents into a spreadsheet. J.S. dollars will to be V118.103/$? Money Rates One month United States Japan Differential 4.8875% 0.09125% 4.79625% he nearest cer Three months 4.9750% 0.09500% 4.88000% Twelve months 5.4750% 0.31250% 5.16250% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. er in the answ Print Done Oicar Check Answer entati....p... Show NOV tv 14 3-month options are available from Kyushu Bank: call option on X30,000,000 at exercise price of 118.000/S: a 1.3 % premium; or a put option on 30 3.3% premium. a. What are the costs and benefits of alternative hedges? Which would you recommend, and why? b. What is the break-even reinvestment rate when comparing forgard and money market alternatives? a. How much in U.S. dollars will Krystal receive in 3 months withouta hedge if the expected spot rate in 3 months is assumed to be 118.103/$? $254015.6 (Round to the nearest cent.) How much in U.S. dollars will Krystal receive in 3 months with a forward market hedge? (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer. 4 parts remaining Clear All NOV 17 tv A F4 FS F6 F3 % & $ 4 2 3 5 6 7 Problem 10-7 (algorithmic) Question Help Krystal. Krystal is a U.S.-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to the City of Nagasaki, Japan, for installation in Nagasakis famous Glover Gardens (where Puccini's Madame Butterfly waited for the retum of Lt. Pinkerton). The sale was priced in yen at W30,000,000, with payment due in three months. The exchange rate and interest rate data are shown in the popup window: Note that the interest rate differentials vary slightly from the forward discounts on the yen because of time differences for the quotes. The spot 118.103/5, for example, is a mid-point range. On April 11, the spot yen traded in London from V118.622/$ to 117.584/S. Krystars Japanese competitors are currently borowing yen from Japanese banks at a spread of two percentage points above the Japanese money rate. Krystars weighted average cost of capital is 15.5 %, and the company wishes to protect the dollar value of this receivable. 3-month options are available from Kyushu Bank call option on V30,000,000 at exercise price of V118.000/S: a 1.3 % premium; or a put option on V30,000,000, at exercise price of V118.000/S a 3.3% premium. a. What are the costs and benefits of altenative hedges? Which would you recommend, and why? b. What is the break-even reinvestment rate when comparing fonard and money market altematives? a. How much in U.S. dollars will Krystal receive in 3 months without a hedge if the expected spot rate in 3 months is assumed to be V118.103/5? $ 254015.6 (Round to the nearest cent.) How much in U.S. dollars will Krystal receive in 3 months with a forward market hedge? (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer ? 4 parts remaining Clear All Check Answer 17 dtv A & 3 4 6 7 9 that ma ardens ystem to the City of h in yen at 30,000,0C Data Table e data slightly 118. weighte 18.103/$, for examp ese banks at a sprea receivable. 118.103/S (closing mid-rates) *117.621/S, a 4.92% per annum premium 116.677/S, a 4.89 % per annum premium 112.519/$, a 4.96% per annum premium Click on the icon located on the top-right corner of the data table in order to Spot exchange rate: 1-month forward rate: 3-month forward: Bank: h 30,000,000, at ex 1-year forward: ative he e when copy its contents into a spreadsheet. Money Rates United States Japan 0.09125% Differential eive in One month 4.8875% 4.79625% 0.09500% 4.88000% Three months 4.9750% 0.31250% 5.4750% 5.16250% Twelve months Click on the icon located on the top-right coner of the data table in order to copy its contents into a spreadsheet. e in 3r Print Done thend Clear All Problem 10-7 (algorithmic) Question Help Krystal. Krystal is a U.S.-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to ther City of Nagasaki, Japan, for installation in Nagasaki's famous Glover Gardens (where Puccini's Madame Butterfly waited for the return of Lt. Pinkerton). The sale was priced in yen at 30,000,000, with payment due in three months. The exchange rate and interest rate data are shown in the popup window: Note that the interest rate differentials vary slightly from the forward discounts on the yen because of time differences for the quotes. The spot 118.103/S, for example, is a mid-point range. On April 11, the spot yen traded in London from 118.622/$ to 117.584/. Krystals Japanese competitors are currently borrowing yen from Japanese banks at a spread of two percentage points above the Japanese money rate. Krystal's weighted average cost of capital is 15.5%, and the company wishes to protect the dollar value of this receivable. 3-month options are available from Kyushu Bank: call option on 30,000,000 at exercise price of V118.000/S: a 1.3% premium; or a put option on 30,000,000, at exercise price of 118.000/S: a 3.3 % premium. a. How much in U.S. dollars will Krystal receive in 3 months without a hedge if the expected spot rate in 3 months is assumed to be V118.103/$? (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer. 5 parts remaining Clear Al Check Answer Uber Presentati....pp... Show All X NOV 14 tv A is a U.S.-base , Japan, for ins in yen at 30,0 Data Table company sold a system he return of Lt. Pinkertc n in the popup window erest rate differ mid-point rang om Japanese b ompany wishe Spot exchange rate: 1-month forward rate: 118.103/$ (closing mid-rates) *117.621/S , a 4.92 % per annum premium *116.677/S, a 4.89 % per annum premium 112.519/S, a 4.96% per annum premium Click on the icon located on the top-right comer of the data table in order to uotes. The spot 118. ese competitors are ca d average cost of capit 3-month forward: 1-year forward: are available fr exercise price h; or a put option on copy its contents into a spreadsheet. J.S. dollars will to be V118.103/$? Money Rates One month United States Japan Differential 4.8875% 0.09125% 4.79625% he nearest cer Three months 4.9750% 0.09500% 4.88000% Twelve months 5.4750% 0.31250% 5.16250% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. er in the answ Print Done Oicar Check Answer entati....p... Show NOV tv 14 3-month options are available from Kyushu Bank: call option on X30,000,000 at exercise price of 118.000/S: a 1.3 % premium; or a put option on 30 3.3% premium. a. What are the costs and benefits of alternative hedges? Which would you recommend, and why? b. What is the break-even reinvestment rate when comparing forgard and money market alternatives? a. How much in U.S. dollars will Krystal receive in 3 months withouta hedge if the expected spot rate in 3 months is assumed to be 118.103/$? $254015.6 (Round to the nearest cent.) How much in U.S. dollars will Krystal receive in 3 months with a forward market hedge? (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer. 4 parts remaining Clear All NOV 17 tv A F4 FS F6 F3 % & $ 4 2 3 5 6 7 Problem 10-7 (algorithmic) Question Help Krystal. Krystal is a U.S.-based company that manufactures, sells, and installs water purification equipment. On April 11, the company sold a system to the City of Nagasaki, Japan, for installation in Nagasakis famous Glover Gardens (where Puccini's Madame Butterfly waited for the retum of Lt. Pinkerton). The sale was priced in yen at W30,000,000, with payment due in three months. The exchange rate and interest rate data are shown in the popup window: Note that the interest rate differentials vary slightly from the forward discounts on the yen because of time differences for the quotes. The spot 118.103/5, for example, is a mid-point range. On April 11, the spot yen traded in London from V118.622/$ to 117.584/S. Krystars Japanese competitors are currently borowing yen from Japanese banks at a spread of two percentage points above the Japanese money rate. Krystars weighted average cost of capital is 15.5 %, and the company wishes to protect the dollar value of this receivable. 3-month options are available from Kyushu Bank call option on V30,000,000 at exercise price of V118.000/S: a 1.3 % premium; or a put option on V30,000,000, at exercise price of V118.000/S a 3.3% premium. a. What are the costs and benefits of altenative hedges? Which would you recommend, and why? b. What is the break-even reinvestment rate when comparing fonard and money market altematives? a. How much in U.S. dollars will Krystal receive in 3 months without a hedge if the expected spot rate in 3 months is assumed to be V118.103/5? $ 254015.6 (Round to the nearest cent.) How much in U.S. dollars will Krystal receive in 3 months with a forward market hedge? (Round to the nearest cent.) Enter your answer in the answer box and then click Check Answer ? 4 parts remaining Clear All Check Answer 17 dtv A & 3 4 6 7 9 that ma ardens ystem to the City of h in yen at 30,000,0C Data Table e data slightly 118. weighte 18.103/$, for examp ese banks at a sprea receivable. 118.103/S (closing mid-rates) *117.621/S, a 4.92% per annum premium 116.677/S, a 4.89 % per annum premium 112.519/$, a 4.96% per annum premium Click on the icon located on the top-right corner of the data table in order to Spot exchange rate: 1-month forward rate: 3-month forward: Bank: h 30,000,000, at ex 1-year forward: ative he e when copy its contents into a spreadsheet. Money Rates United States Japan 0.09125% Differential eive in One month 4.8875% 4.79625% 0.09500% 4.88000% Three months 4.9750% 0.31250% 5.4750% 5.16250% Twelve months Click on the icon located on the top-right coner of the data table in order to copy its contents into a spreadsheet. e in 3r Print Done thend Clear All