Question: Question 11 2 pts ABC, a U.S. based MNC, plans to use a money market hedge to hedge its payment of 5 million New Zealand

Question 11 2 pts ABC, a U.S. based MNC, plans to

Question 11 2 pts ABC, a U.S. based MNC, plans to use a money market hedge to hedge its payment of 5 million New Zealand dollars (NZD) for NZ goods in 2 years. The nominal annual U.S. interest rate is 6% while that of NZ is 10%. The spot rate of the NZD is $0.68 while the 2 year forward rate is $0.63. Should ABC hedge its payables with a money market hedge or a forward hedge? Time Running Attempt due: Mar 7 26 Minutes, 32 S The money market hedge is preferable because it results in a lower U.S. dollar cash outflow O The forward hedge is preferable because it results in a lower US. doilar cash outflow O The money market hedge is preferable because it results in a higher US dollar cash inflow The forward hedge is preferable because it results in a higher US dollar cash inflow

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Question 10 2 pts ABC, a U.S. based MNC, plans to use a money market hedge to hedge its payment of 5 million New Zealand dollars (NZD) for NZ goods in 2 years. The nominal annual U.S. interest rate...

Question 10 2 pts ABC, a U.S. based MNC, plans to use a money market hedge to nominal annual U.S. interest rate is 6% while that of NZ s10% Th of U.S. dollars needed in 2 years if a money market...

ABC, a U.S. based MNC, plans to hedge its payment of 5 million New Zealand dollars (NZD) for NZ goods in 2 years. The nominal annual U.S. interest rate is 6% while that of NZ is 10%. The spot rate of...

3. (a) Maendeleo. Co., a U.S. firm plans to use a money market hedge to hedge its payment of 5 million Australian dollars for Australian goods in one year. The U.S interest rate is 6 percent, while...

3. (a) Maendeleo Co., a U.S. firm plans to use a money market hedge to hedge its payment of 5 million Australian dollars for Australian goods in one year. The U.S interest rate is 6 percent, while...

1. Montclair Co., a U.S. firm, plans to use a money market hedge to hedge its payment of 3 million Australian dollars for Australian goods in 1 year. The U.S. interest rate is 7 percent, while the...

Problem 4 - Hedging Alternatives on Payables (20 marks) Clairaise Co., a U.S. firm, plans to use a money market hedge to hedge its payment of 3 million Singapore dollars for Singapore goods in 1...

:Solve. Question 1 Harvey plc, a UK-based multinational corporation, expects to make a payment of 4 million New Zealand dollars (NZ$) to a New Zealand supplier, in 90 days' time. The current spot...

Question 1 Harvey plc, a UK-based multinational corporation, expects to make a payment of 4 million New Zealand dollars (NZ$) to a New Zealand supplier, in 90 days time. The current spot exchange...

4.Assume the following information: U.S.deposit rate for 1 year = 11% U.S.borrowing rate for 1 year = 12% Swiss deposit rate for 1 year = 8% Swiss borrowing rate for 1 year = 10% Swiss forward rate...

Indicate whether each of the following costs should be classified as a product cost or as a selling, general, and administrative cost. a. Interest on the mortgage for the company's corporate...

In the context of memory management, what are placement and replacement algorithms?

Which one of the following is not a factor routinely considered in valuing a stock option? A . Industry classification of the stock. B . Risk - free rate of return. C . Strike price of the option. D...

P-1) (100 Pts.) A chemical manufacturing company (CMC) has a contract for the procurement of the neccssaly chemicals from four suppliers. The chemicals purchased from Supplier A are priced at $20...

5. Consider a scene from a favorite film or novel. Imagine how it would change if you had not seen the rest of the film or read the entire novel. Would you come away from it with the same meaning if...

4. Describe two communication situations, one in which the communication was appropriate but not effective, and one in which the communication was effective but not very appropriate. Analyze these...

1. LaunchPad for Real Communication offers key term videos and encourages selfassessment through adaptive quizzing. Go to bedfordstmartins.com/ realcomm to get access to: LearningCurve Adaptive...