Question
Intel, a US semiconductor manufacturer, has sold SGD 70 million worth of computer chips to a Singapore company. The payment (in SGD) is due in
Intel, a US semiconductor manufacturer, has sold SGD 70 million worth of computer chips to a Singapore company. The payment (in SGD) is due in six (6) months.
Intel is given the following information:
Spot rate = SGD 1.32 / USD
9-month forward rate = SGD 1.35 / USD
Interest rate in Singapore = 2% per year
Interest rate in U.S.A. = 3% per year
Intels own forecast suggests that the spot rate 6 months from now is most likely SGD 1.34 / USD.
If the firm uses the forward hedge, how much USD will it need in 6 months?
| USD 51,852,000 |
| USD 52,240,000 |
| USD 51,852,000 |
| USD 53,030,000 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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
Volatility Trading
Authors: Euan Sinclair
2nd Edition
1118347137, 9781118347133
