Michelle Co. a US firm, plans to use a money market hedge to hedge its payment of $2,000,000 Australian dollars for Australian goods in a year. The U.S Interest rate is 8%, while the Australian Interest rate is 11%. The spot rate of the Australian dollar is $0.77, while the 1 year forward rate is $0.72. Determine the amount of U.S dollars needed in 1 year if a money market hedge is used. $245,765,879.34 $175,834,193 $1,498,378.378 $320,307,372.07
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- Heidi Høi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $15 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Heidi plans to use the following quotes to make a covered interest arbitrage (CIA). Assumptions Arbitrage funds available Spot exchange raté (kr/S) 3-month forward rate (kr/S) US dollar 3-month interest rate Danish kroner 3-month interest rate Value $15,000,000 5.1197 5.1611 4.4679% 8.0239% Because for this level of analysis/problems, small differences in % lead to arbitrage profit/losses, please always use 4 digits in your calculations For your answer (since this is a dollars answer), round your answer to the nearest $0.01 (use 2 decimals). DO NOT USE commas to separate thousands. For negative results, enter the minus (-) symbol in front of the first digit/#. For example, if your answer is $4,000,287.329; then enter 4000287.33; if your answer is $400 then enter 400.00 If Heidi makes…XYZ Corporation, located in the United States, has an accounts payable obligation of ¥1500 million payable in six months to a bank in Tokyo. The current spot rate is ¥116/$1.00 and the six month forward rate is ¥109/$1.00. The annual interest rate is 3 percent in Japan and 6 percent in the United States. a) What is the future dollar cost of meeting this obligation using the money market hedge a. $92,307. b. $ 19582168.89 c. $13054779.26 d. $ 6589854.111Assume that Stevens Point Co. has net receivables of 150,000 Singapore dollars in 90 days. The spot rate of the S$ is $.52, and the Singapore interest rate is 2% over 90 days. Suggest how the U.S. firm could implement a money market hedge. Be precise.
- Suppose you, a German importer, expect to pay $1 million in 90 days for taking delivery of import goods from a U.S. exporter. St = $1.14/€; Ft, k = $1.16/€, where k =90 days. If St+k = $1.15/€, what would be the gain or loss from the forward hedge relative to remaining unhedged?Assume that Stevens Point Co. has net receivables of 100,000 Singapore dollars in 90 days. The spot rate of the Singapore dollar is $.50, and the Singapore interest rate is 2 percent over 90 days. Suggest how the U.S. firm could implement a money market hedge.Assume that Hampshire Co. has net payables of 200,000 Mexican pesos in 180 days. The Mexican interest rate is 7 percent over 180 days, and the spot rate of the Mexican peso is $.10. Suggest how the U.S. firm could implement a money market hedge. Be precise.
- Consider a U.S.-based company that exports goods to Switzerland. The U.S. Company expects to receive payment on a shipment of goods in six months. Because the payment will be in Swiss francs, the U.S. Company wants to hedge against a decline in the value of the Swiss franc over the next six months. The U.S. risk-free rate is 2.6 percent, and the Swiss risk-free rate is 1.0 percent. Assume that interest rates are expected to remain fixed over the near future. The current USD/CHF rate is 1.1058. Calculate the price at which the U.S. Company could enter into a forward USD/CHF contract that expires in 180 days (X.XXXX)Heidi Høi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Assumptions Arbitrage funds available Spot exchange rate (kr/$) 3-month forward rate (kr/S) US dollar 3-month interest rate Danish kroner 3-month interest rate Value $5,000,000 6.1720 6.1980 4.000% a) 5.000% a) kr Equivalent kr 30,860,000 Heidi Høi Jensen generates a covered interest arbitrage profit because, although U.S. dollar interest rates are lower, the U.S. dollar is selling forward at a premium against the Danish krone. What is the amount of that profit? kr21,102 kr34,750 kr24,250 kr54,150Consider a US company, GateCorp, that exports products to the United Kingdom. GateCorp has just closed a sale worth £200,000,000. The amount will be received in two months. Because it will be paid in pounds, the US company bears the exchange risk. In order to hedge this risk, GateCorp intends to use a forward contract that is priced at $1.4272 per pound. Indicate how the company would go about constructing the hedge. Explain what happens when the forward contract expires in two months.
- A US based investor plans to invest $44,400 in Russia, where the interest rate is 6.65%. If the current exchange rate is $1 US buys 55 Rubles and the future expected exchange rate is $1 US buys 51.5 Rubles, then what is the future value of this investment? $50,570.7 $52,225.5 $52,990.0 O $54,040.4Assume that Riverside Corp. from the United States will receive 400,000 pounds in 180 days. The following information is available in current and forward markets: 180‑day U.S. interest rate = 8% 180‑day British interest rate = 9% 180‑day forward rate of British pound = $1.50 Spot rate of British pound = $1.48 How much will Riverside Corp. receive in dollars in 180 days fare if it uses a money market hedge for the 400,000 pounds? Please show your steps, thank you!a) Assume the following information: 180‑day U.S. interest rate = 8% 180‑day British interest rate = 9% 180‑day forward rate of British pound = $1.50 Spot rate of British pound = $1.48 Assume that a U.S. exporter will receive 400,000 pounds in 180 days. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge. b) As treasurer of a U.S. exporter to Canada, you must decide how to hedge (if at all) future receivables of 250,000 Canadian dollars 90 days from now. Put options are available for a premium of $.03 per unit and an exercise price of $.80 per Canadian dollar (CA$). The forecasted spot rate of the CA$ in 90 days follows: Future Spot Rate Probability (%) $.75 50…