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(6) The Ubisense Group Plc have exposure of Paraguay Guarani (Gs) Gs37.5 million. The spot rate on the Bolivia Boliviano ($b) is Gs2.4558/$b 1, while
(6) The Ubisense Group Plc have exposure of Paraguay Guarani (Gs) Gs37.5 million. The spot rate on the Bolivia Boliviano ($b) is Gs2.4558/$b 1, while the 60-day future rate is Gs2.4550/$b1. Required: (a) If Ubisense believe that the Bolivia Boliviano will appreciate in value against the Paraguay Guarani, such that they expect the spot rate to be Gs2.4600/$b1 at the end of 60 days, what should they do? (b) If Ubisense believe that the Bolivia Boliviano will depreciate in value against the Paraguay Guarani such that they expect the spot rate to be Gs2.3800/$b1 at the end of 60 days, what should they do? (6 Marks) Ubisense now believe that the Venezuela Bolivar (Bs) will appreciate in value against the Russian Ruble (P) in the oncoming one-month period. They have exposure of P100,000. The current spot rate is P0.6820/Bs, the one month forward rate is P0.6640/Bs, and they expect the spot rate to reach P0.7250/Bs in one month's time. Required: (c) Calculate Ubisense's expected profit assuming a pure spot market speculation strategy and explain it. (d) Determine Ubisense's expected profit assuming they buy or sell Bs one month forward and explain it (6 Marks) (e) Explain in detail what FOREX exposure is and the various forms of FOREX derivatives available to Ubisense to hedge that exposure. (13 Marks)
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