Question
An Indian exporter of jewelry is owed BDT 624,688,000 by its Bangladeshi customer (BDT = Bangladeshi Taka) in two years. The spot rate S(INR/BDT) is
An Indian exporter of jewelry is owed BDT 624,688,000 by its Bangladeshi customer (BDT = Bangladeshi Taka) in two years. The spot rate S(INR/BDT) is 0.86675 (INR = Indian Rupee); the interest rate in Bangladesh is iB=7.75% and the interest rate in India is iI=7%. The exporter decides to hedge her exposure with a money market hedge (assume she has to borrow in t=0 to execute the money market hedge). How much money does the exporter receive from / pay to her domestic bank in t=2?
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Foundations Of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
18th Edition
126409762X, 9781264097623
