Question
Assume the following information: GBP deposit rate for1year=3% GBP borrowing rate for1year=4% Australian Dollar deposit rate for1year=4% Australian Dollar borrowing rate for1year=5% AUD/GBP1year forward rate=0.59
Assume the following information:
GBP deposit rate for 1 year = 3%
GBP borrowing rate for 1 year = 4%
Australian Dollar deposit rate for 1 year = 4%
Australian Dollar borrowing rate for 1 year = 5%
AUD / GBP 1 year forward rate = 0.59
Spot AUD / GBP = 0.58
Assume that a British exporter denominates its Australian exports in AUD and expects to receive AUD 2,000,000 in 1 year. Using the information above, what will be the approximate value of these exports in 1 year in GBP if the firm executes forward hedge and a money market hedge? Which one is more feasible for the company?
Step by Step Solution
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Step: 1
1 Forward Hedge Lock in a fixed exchange rate The exporter enters a 1year forward contract to sell A...
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Spreadsheet Modeling And Decision Analysis A Practical Introduction To Management Science
Authors: Cliff T. Ragsdale
5th Edition
324656645, 324656637, 9780324656640, 978-0324656633
