Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 05, 2024

electro Inc. is a manufacturing firm based in the United States. Today is the 1 st of January 2021, and the firm has to pay

electro Inc. is a manufacturing firm based in the United States. Today is the 1^st of January 2021, and the firm has to pay 5 million Great British pounds (GBP) to a British supplier in six months time (1^st July 2021). The treasurer of Electro Inc. wants to hedge against exchange rate movements by entering into a forward contract with ABC Bank. The 6-month forward quote for the USD/GDP exchange rate is 2.0631.

Calculate and explain the payoff from a long position in a forward contract for Electro Inc., if the spot exchange rate is 2.0631 on the 1^st of July 2021

Calculate and explain the payoff from a short position in a forward contract for ABC Bank, if the spot exchange rate is 2.0631 on the 1^st of July 2021.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

A computer database at a downtown law firm contains files for N = 1000 clients. The firm wants to select n = 5 files for review. Select a simple random sample of 5 files from this database.

Answered: 1 week ago

Question

★★★★★

During the last few years, Jana Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company...

Answered: 1 week ago

Question

★★★★★

Tamarisk, Inc.s bank statement from Main Street Bank at August 31, 2022, gives the following information. Balance, August 1 $18,700 Bank debit memorandum: August deposits 71,300 Safety deposit box...

Answered: 1 week ago

Question

★★★★★

An investor is saving $1,000 every quarter for the next seven years (28 contributions). If the investment earns 6% interest, how much will the investor have in seven years? An investor is saving...

Answered: 1 week ago

Question

★★★★★

Inventory Microbucks Computer Company makes two computers, the Pomegranate II and the Pomegranate Classic, at two different factories. The Pom II requires 2 processor chips, 16 memory chips, and 20...

Answered: 1 week ago

Question

★★★★★

Calculate the Critical Ratios (CR): (Enter all responses rounded to two decimal places.) Job CR 1 The following jobs are waiting to be processed at Jeremy LaMontagne's machine center. Today is day...

Answered: 1 week ago

Question

★★★★★

Employees at a large manufacturer are surprised to find that cameras have been installed throughout the plant and all email communications are being monitored. Many are concerned about privacy and...

Answered: 1 week ago

Question

★★★★★

Compute Wynn Memorial Nursing Home's days in accounts receivable. Compute Wynn Memorial Nursing Home's average payment period. Balance Sheet for Wynn Memorial Nursing Home Wynn Memorial Nursing Home...

Answered: 1 week ago

Question

★★★★★

10. Three polarizing disks have planes that are parallel and centered on a common axis. The direction of the transmission axis (dashed line) in each case is shown relative to the common vertical...

Answered: 1 week ago

Previous Question Next Question