Question
Need solved asap!! please ToysRGreat ($-based, located in Las Vegas) is completing a new assembly plant outside of Berlin, Germany. ToysRGreat expects to pay the
Need solved asap!! please
ToysRGreat ($-based, located in Las Vegas) is completing a new assembly plant outside of Berlin, Germany. ToysRGreat expects to pay the final construction payment of amount of 1,000,000 in three months. The current bid-ask quotes for the spot exchange rate are 0.5682-0.5714/$. The quotes for the three-month forward are 0.5495-0.5525/$. Three-month Germany and U.S. interest rates are respectively 2.1-2.0% and 3.0-2.9% per annum, compounded quarterly. Note that the borrowing and lending rates (in that order) are presented for each currency. Three months later the $ is quoted at 0.5236-0.5263 /$. Using the above information to answer Problems # 1, # 2 and #3 ( PLEASE SHOW ALL WORK)
1 . If ToysRGreat uses forward hedge, how much has the forward market hedge costed (benefited) the company?
2 . If ToysRGreat uses money market hedge, how much has the MMH costed (benefited) the company?
3 . Which hedge is a better choice for the company today and why? PLEASE SHOW ALL WORK
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