Can I please have this solved step by step I will rate 5 stars
4. Suppose OSG supplied products to a US company in late April 2006 and expected to receive $1 million in the end of July 2006. a) Use Exhibit 10 for minimum forward-cover, what would be the amount of forward cover required? Note: The formula in point 2 of Exhibit 10 is confusing, Please use the formula in the lecture note. Receiving (Paying) the points forward means the company is receiving (paying) forward premium (discount) of the foreign currency EXHIBIT 10: ACCOUNT RECEIVABLES, MINIMUM FORWARD: COVER BY A US CORPORATION 1. S. Corporation in the US did away with selective hedging. If the maturity of the transaction is known, all cash flow denominated in foreign currency must adhere to the forward contract cover formula determined by the company's board in advance. Remaining amounts, if any, may be left uncovered. The points, paying or receiving on the forward rate, are the forward rate's premium or discount defined by the formula in 2. Exposure Coverage Required Less than 90 days 90-180 days 780 days or longer 75% 45% 50% 100% 90% 60% *paying the points forward" "receiving the points forward" po 2. Use the following formula to find the forward rate's premium or discount. The forward premium or discount is the percentage difference between the spot and forward exchange rate, stated in annual percentage terms. When the foreign currency price of the home currency (US dollar) is used as in this case of yen per dollar, the formula for the percent- per-annum premium or discount (denoted / here for yen) becomes: tra hve! ple, S. Spot - Forward 360 X Forward d ays to maturity - X 100 4. Suppose OSG supplied products to a US company in late April 2006 and expected to receive $1 million in the end of July 2006. a) Use Exhibit 10 for minimum forward-cover, what would be the amount of forward cover required? Note: The formula in point 2 of Exhibit 10 is confusing, Please use the formula in the lecture note. Receiving (Paying) the points forward means the company is receiving (paying) forward premium (discount) of the foreign currency EXHIBIT 10: ACCOUNT RECEIVABLES, MINIMUM FORWARD: COVER BY A US CORPORATION 1. S. Corporation in the US did away with selective hedging. If the maturity of the transaction is known, all cash flow denominated in foreign currency must adhere to the forward contract cover formula determined by the company's board in advance. Remaining amounts, if any, may be left uncovered. The points, paying or receiving on the forward rate, are the forward rate's premium or discount defined by the formula in 2. Exposure Coverage Required Less than 90 days 90-180 days 780 days or longer 75% 45% 50% 100% 90% 60% *paying the points forward" "receiving the points forward" po 2. Use the following formula to find the forward rate's premium or discount. The forward premium or discount is the percentage difference between the spot and forward exchange rate, stated in annual percentage terms. When the foreign currency price of the home currency (US dollar) is used as in this case of yen per dollar, the formula for the percent- per-annum premium or discount (denoted / here for yen) becomes: tra hve! ple, S. Spot - Forward 360 X Forward d ays to maturity - X 100
