Question
Assume that TVN Co. has net receivables of 800,000 in 90 days (TVN is a U.S.-based MNC). The U.K. interest rate is 2 percent over
Assume that TVN Co. has net receivables of 800,000 in 90 days (TVN is a U.S.-based MNC). The U.K. interest rate is 2 percent over 90 days, and the spot rate of the British Pound is $ 1.30. The U.S. interest rate is 3 percent over 90 days. Suggest whether the U.S. firm should implement a money market hedge or obtain a forward contract or purchase an option to hedge the receivables. The relevant 90-day forward rate is $1.34. The option has a strike price of $1.36 and a premium of $ 0.025. Also, calculate the implied exchange rate. Show all the necessary calculations
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