Carrycan plc must make a payment of $364 897 in six months time. It is currently 1

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Carrycan plc must make a payment of $364 897 in six months’ time. It is currently 1 January. The company plans to hedge its transaction exposure and has collected the following information.

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By making appropriate calculations, decide which of the following hedges is most attractive to Carrycan plc:

(a) forward market (i.e. a forward exchange contract);

(b) cash market;

(c) currency options.

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Corporate Finance Principles And Practice

ISBN: 9780273725343

5th Edition

Authors: Denzil Watson, Antony Head

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Question Posted: Jun 06, 2024 01:14 AM

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Carrycan plc must make a payment of $364 897 in six months time. It is currently 1

Question:

Exchange rates: $/ spot rate 1.5617-1.5773 Six-month $/ forward rate 1.5455-1.5609 Money market rates: US dollars Sterling Borrow Deposit (%) (%) 6 4.5 7 5.5 Foreign currency option prices (cents per for contract size 12 500): Exercise price $1.70 Call option (June) 3.7 Put option (June) 9.6

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Corporate Finance Principles And Practice

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