Krystal. Krystal is a US-based company that manufactures sells and instalis water purification equipment On April 11, the company sold a system to the City of Nagasaki, Japan, for Installation in Nagasaki's famous Glover Gardens (where Puccinis Madame Butterfly waited for the return of Lt Pinkerton) The sale was priced in yen at 429,000,000, with payment de in three months. The exchange rate and interest rate data are shown in the popup Window Note that the interest rate differentials vary slightly from the forward discounts on the yon because of time differences for the quotes. The spot X117742/5, for example, is a midpoint range. On April 11, the spot yen traded in London From 1118.658/5 to 116.825/ Keystars Japanese competitors are currently borrowing yen from Japanese banks at a spread of two pufcentage points above the Japanese money rate. Krystars weighted average cost of capital is 15%, and the company wishes to protect the dollar value of this receivable, 3-month options are alabile from Kyushu Bank call option on 129,000,000 at exerche price of 117.000 a 1.9% premium or a put option on X29,000,000, at exercise price of 1117.000/5 a 3.1 premium a. What are the costs and benefits of alternative hedges? Which would you recommend, and why? b. What is the break-even reinvestment rate when comparing forward and money market leative? a. How much in US dolars will Krystal receive in 3 months without a hedge of the expected to rate in 3 months is assumed to be 117 742/5? Round to the nearest cent) Spot exchange rate: 117.742/$ (closing mid-rates) 1-month forward rate: 117.228/$, a 5.26% per annum premium 3-month forward: 116.334/$, a 4.84% per annum premium 1-year forward 111.913/$, a 5.21% per annum premium Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. Money Rates United States Japan Differential One month 4.8750% 0.09875% 4.77625% Three months 4.9625% 0.09875% 4.86375% Twelve months 5.2125% 0.31625% 4.89625% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheer Krystal. Krystal is a US-based company that manufactures sells and instalis water purification equipment On April 11, the company sold a system to the City of Nagasaki, Japan, for Installation in Nagasaki's famous Glover Gardens (where Puccinis Madame Butterfly waited for the return of Lt Pinkerton) The sale was priced in yen at 429,000,000, with payment de in three months. The exchange rate and interest rate data are shown in the popup Window Note that the interest rate differentials vary slightly from the forward discounts on the yon because of time differences for the quotes. The spot X117742/5, for example, is a midpoint range. On April 11, the spot yen traded in London From 1118.658/5 to 116.825/ Keystars Japanese competitors are currently borrowing yen from Japanese banks at a spread of two pufcentage points above the Japanese money rate. Krystars weighted average cost of capital is 15%, and the company wishes to protect the dollar value of this receivable, 3-month options are alabile from Kyushu Bank call option on 129,000,000 at exerche price of 117.000 a 1.9% premium or a put option on X29,000,000, at exercise price of 1117.000/5 a 3.1 premium a. What are the costs and benefits of alternative hedges? Which would you recommend, and why? b. What is the break-even reinvestment rate when comparing forward and money market leative? a. How much in US dolars will Krystal receive in 3 months without a hedge of the expected to rate in 3 months is assumed to be 117 742/5? Round to the nearest cent) Spot exchange rate: 117.742/$ (closing mid-rates) 1-month forward rate: 117.228/$, a 5.26% per annum premium 3-month forward: 116.334/$, a 4.84% per annum premium 1-year forward 111.913/$, a 5.21% per annum premium Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. Money Rates United States Japan Differential One month 4.8750% 0.09875% 4.77625% Three months 4.9625% 0.09875% 4.86375% Twelve months 5.2125% 0.31625% 4.89625% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheer
