Jamies Food based in the United Kingdom exports its products to the European Union. (a) Jamies food generally invoices in Pound sterling when it sells to foreign customers in order to guard against adverse exchange rate changes. Nevertheless, it has just received an order from a large wholesaler in Germany, conditional upon delivery being made in 1 months time and the order invoiced in euros. The Bank of Jamies food offers to set up a forward hedge for selling the euro receivable for the pound sterling. You are provided with the following information:

REQUIRED: Determine the premium/discount for selling the euro receivable for pound sterling based in the one month forward market. (

(b)Jamies Food is fearing depreciation of the pound sterling due to the Brexit. Advise the operations manager of Jamies Food on pricing initiatives how to hedge risk at operational level. (7 marks)

(c) Jamies food has invested in the shares of a Japanese company MIZO which exports to the United Kingdom. Initially Jamies food bought the shares at the unit price of JPY 5 and exchange rate 0.007/JPY . Suppose that the pound sterling depreciates vis a vis the Japanese Yen to 0.009/JPY. Calculate Jamies food forex exposure per unit share if Mizo share price decreases to (i) 4 JPY (ii) 3 JPY. Comment on your answer.