Question
5. The financial manager of Amazing Company is considering alternative hedging strategies and the following information is available. U.S. borrowing rate for 1 year =
5. The financial manager of Amazing Company is considering alternative hedging strategies and the following information is available.
U.S. borrowing rate for 1 year = 9.5%
U.S. deposit rate for 1 year = 8.7%
Polish borrowing rate for 1 year = 11.3%
Polish deposit rate for 1 year = 10.2%
Polish zloty spot quote = $0.1763-1778
Polish zloty 1-year forward quote = $0.1729-1747
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If Amazing Company executes a money market hedge today, what value can Amazing Company lock in for a receivable of Pln3 million due in one year.
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What is the value Amazing Company can lock in for its Pln3 million receivable if it executes a forward contract today?
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