2. Hindustan Lever. Unilever's affiliate in India, Hindustan Lever, procures much of its toiletries product line from
Question:
2. Hindustan Lever. Unilever's affiliate in India, Hindustan Lever, procures much of its toiletries product line from a Japanese company. Because of the shortage of working capital in India, payment terms by Indian importers are typically 180 days or longer. Hindustan Lever wishes to hedge an 8.5 mil- lion Japanese yen payable. Although options are not available on the Indian rupee (Rs), forward rates are available against the yen. Additionally, a common practice in India is for companies like Hindustan Lever to work with a currency agent who will, in this case, lock in the current spot exchange rate in exchange for a 4.85% fee. Using the following exchange rate and interest rate data, recommend a hedging strategy.
Step by Step Answer:
Fundamentals Of Multinational Finance
ISBN: 9780321541642
3rd Edition
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman