Baton Rouge Inc.. located in Germany is involved in the production of motor bikes and currently exports these products to India. The company must import certain raw materials needed in the manufacturing process and has entered into fixed contractual arrangements with some of its suppliers. Its main suppliers are from India and the Philippines and both the Indian rupee and the Philippines peso are highly correlated. The company has net inflows denominated in rupees and net outflows in pesos and its transaction exposure would be decreased if both currencies were highly correlated. Recently both currencies have experienced high correlation and the company is hoping to benefit from this new development. Baton Rouge has decided to establish a subsidiary in India and plans to finance this expansion with a combination of 60% debt and 40 e quity. The average yleid on the company's bonds is B\%, Treasury sackify rates are 2% and the company's stock has a beta of 1 3. The return on the G Ax index ls expected to be 11\% and the German' corporate lax rate is 40%. The company would like to explore the posstblity of covered intetest arbitrage. The quoted a l80-day fomard rata af 80.0225 for each rupee the current spot rate is The company has net inflows denominated in rupees and net outtiows in pesos and its transaction exposure would be decreased if both currencies were highly correlated. Recently both currencles have experienced high correlation and the company is hoping to benefit from this new development. Baton Rouge has declded to establish a subsidiary in India and plans to finance this expansion with a combination of 60% debt and 40% equity. The average yieid on the company's bonds is 8%, Treasury security rates are 2% and the company's stock has a beta of 1.3. The refum on the DAx Index is expected to be 119 and the German conporate tax rate is 40%. The compony would ite to explore the possiolity of covered interett-arbitrage. The quoted. 180-doy torward rate of e0. 0225 for fooh rupae the cument rpotrote is. 60.0227. The 180-oay interest rater in Gemany ore 25 and 3.758:in incia, a. Explain whether the odmpany wou a be exposed to foreian exchange exporure transoction. ecanomic. ond tranilation/. D. Do you beliave the increated correldiont tehwaen both currancief Wal attect the company's trartsaction expororef Whyt C. Uring thI CAFM artimote the quaroge weigried Baton Rouge Inc.. located in Germany is involved in the production of motor bikes and currently exports these products to India. The company must import certain raw materials needed in the manufacturing process and has entered into fixed contractual arrangements with some of its suppliers. Its main suppliers are from India and the Philippines and both the Indian rupee and the Philippines peso are highly correlated. The company has net inflows denominated in rupees and net outflows in pesos and its transaction exposure would be decreased if both currencies were highly correlated. Recently both currencies have experienced high correlation and the company is hoping to benefit from this new development. Baton Rouge has decided to establish a subsidiary in India and plans to finance this expansion with a combination of 60% debt and 40 e quity. The average yleid on the company's bonds is B\%, Treasury sackify rates are 2% and the company's stock has a beta of 1 3. The return on the G Ax index ls expected to be 11\% and the German' corporate lax rate is 40%. The company would like to explore the posstblity of covered intetest arbitrage. The quoted a l80-day fomard rata af 80.0225 for each rupee the current spot rate is The company has net inflows denominated in rupees and net outtiows in pesos and its transaction exposure would be decreased if both currencies were highly correlated. Recently both currencles have experienced high correlation and the company is hoping to benefit from this new development. Baton Rouge has declded to establish a subsidiary in India and plans to finance this expansion with a combination of 60% debt and 40% equity. The average yieid on the company's bonds is 8%, Treasury security rates are 2% and the company's stock has a beta of 1.3. The refum on the DAx Index is expected to be 119 and the German conporate tax rate is 40%. The compony would ite to explore the possiolity of covered interett-arbitrage. The quoted. 180-doy torward rate of e0. 0225 for fooh rupae the cument rpotrote is. 60.0227. The 180-oay interest rater in Gemany ore 25 and 3.758:in incia, a. Explain whether the odmpany wou a be exposed to foreian exchange exporure transoction. ecanomic. ond tranilation/. D. Do you beliave the increated correldiont tehwaen both currancief Wal attect the company's trartsaction expororef Whyt C. Uring thI CAFM artimote the quaroge weigried
