Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ABC Inc is an US based MNC and is expanding. It has recently ordered some machinery from Japan. The machines cost 2 0 0 million

ABC Inc is an US based MNC and is expanding. It has recently ordered some machinery from Japan. The machines cost 200 million JPY and they will arrive in the next 6 months when that payment is due. The spot USDJPY rate is 135 and the 6 month future rate for USDJPY =142. If the current interest rate in Japan is 0% and in the US is 4.5%. What is a preferable method of hedging: Futures or Money-market hedge and why? (calculate the dollar payments in both the cases)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Risk Sensitive Investment Management

Authors: Mark H A Davis, Sébastien Lleo

1st Edition

9814578037, 978-9814578035

More Books

Students also viewed these Finance questions