The current euro/US dollar exchange rate is 1:$2.Company a Eurozone company, makes a $1,000 sale to a US customer on credit. By the time the customer pays, the euro has strengthened by 20%. What will the euro receipt be.

The forward rate is 0.8500 - 0.8650 euros to the 1$. What will a 2,000 receipt be converted to at the forward rate.

A US company owes a European company 3.5m due to be paid in 3 months' time. The spot exchange rate is $1.96 - $2:1 currently. Annual interest rates in the two locations are as follows.

borrowingdeposits

US8%3%

Europe5%1%

What will be the equivalent US$ value of the payment using a money market hedge.

A company whose home currency is the dollar ($) expects to receive 500,000 pesos in 6 months' time from a customer in a foreign country. The following interest rates and exchange rates are available to the company:

Spot rate 15.00 peso per $

Six-month forward rate 15.30 peso per $

Home country Foreign country

Borrowing interest rate 4% per year 8% per year

Deposit interest rate 3% per year 6% per year

Working to the nearest $100, what is the 6-month dollar value of the expected receipt using a money market hedge.

An investor plans to exchange $1,000 into euros now, invest the resulting euros for 12 months, and then exchange the euros back into dollars at the end of the 12-month period. The spot exchange rate is 1.415 per $1 and the euro interest rate is 2% per year. The dollar interest rate is 1.8% per year.

Compared to making a dollar investment for 12 months, at what 12-month forward exchange rate will the investor make neither a loss nor a gain.

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To answer your finance questions lets break down each question individually Euro Receipt Calculation The current euroUS dollar exchange rate is 12 If ... View the full answer