Your firm is an Italian importer of bicycles.You have placed an order with a Swiss firm for SFr.2,000,000 worth of bicycles.Payment (in francs) is due in 12 months.Use a money market hedge to redenominate this one-year franc denominated payable into a euro-denominated payable with a one-year maturity.
| Contract Size | Country | U.S. $ equiv. | Currency per U.S. $ | interest rates | APR |
|---|---|---|---|---|---|
| £ 10,000 | Britain (pound) | 1.9600 | £ 0.5102 | ||
| 12 months forward | 2.0000 | £ 0.5000 | |||
| € 10,000 | Euro | 1.5600 | € 0.6410 | i$ = | 1% |
| 12 months forward | 1.6000 | € 0.6250 | i€ = | 2% | |
| SFr. 10,000 | Swiss franc | 0.9200 | SFr. 1.0870 | i£ = | 3% |
| 12 months forward | 1.0000 | SFr. 1.0000 | iSFr. = 4 | 4% |
A) €1,116,826.92
B) €1,250,000
C) €1,134,122.29
D) €1,156,804.73
Correct Answer:
Verified
Q41: Buying a currency option provides
A)a flexible hedge
Q42: Your firm is a U.K.-based importer of
Q43: A Japanese exporter has a €1,000,000
Q44: Your firm is a Swiss importer of
Q45: A Japanese importer has a €1,000,000
Q47: A U.S.firm has sold an Italian firm
Q48: Your firm is an Italian importer of
Q49: From the perspective of a corporate CFO,when
Q50: A Japanese exporter has a €1,000,000
Q51: Your firm is an Italian exporter of
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents