Please answer Questions b
Answer problem b
A US firm makes sales to a British firm in March but the British firmm is going to pay 1,000,000 to the US firm in June, which is 3 months later. a) Suppose that the spot rate in March is S/E 1.7640 and the 3-month forward rate is $/ 1.7540 and the 3-month British borrowing rate is 10 %. Calculate the break even interest rate that makes you indifferent between money market hedge and forward contract. (10 Points) Spot rak $/L1610 Dfofunid: 1000 00L1540 for uuld = Dleti15uD 1o4-2.5- 54,000 t,000,000 l+.095 15, 610 120 946 1754, 0o0 6 1,120,416 -I -. Di42 4.63 b) If the settled rate of the option contract is S/E 1.7.5 ih a premium cost af 1.5%aleulate the net proceed if the spot exchange rate in Jun is $/ 1.76 (US 3-month interest Pare Points) 12%) (15 1) A US firm makes sales to a British firm in March but the British firm is going to pay 1,000,000 to the US firm in June, which is 3 months later. a) Suppose that the spot rate in March is $/ 1.7640 and the 3-month forward rate is $/ 1.7540 and the 3-month British borrowing rate is 10 %. Calculate the break even interest rate that makes you indifferent between money market hedge and forward contract. (10 Points) Spot rateb/ 1-7640 Folunid: 000001540o =7541o00 10 14= Foruculd= letL9540 2-5.1 1/000,000 1+.095 45, 610 20916 41954, 000 61,120,46 -I.DI42 10 40 b) If the settled rate of the option contract is $/E 175.with a premium cost of 1.5%, galculate the net proceed if the spot exchange rate in June is $/ 1.76 (0S 3-month interest rate is 12% (15 Points) A US firm makes sales to a British firm in March but the British firmm is going to pay 1,000,000 to the US firm in June, which is 3 months later. a) Suppose that the spot rate in March is S/E 1.7640 and the 3-month forward rate is $/ 1.7540 and the 3-month British borrowing rate is 10 %. Calculate the break even interest rate that makes you indifferent between money market hedge and forward contract. (10 Points) Spot rak $/L1610 Dfofunid: 1000 00L1540 for uuld = Dleti15uD 1o4-2.5- 54,000 t,000,000 l+.095 15, 610 120 946 1754, 0o0 6 1,120,416 -I -. Di42 4.63 b) If the settled rate of the option contract is S/E 1.7.5 ih a premium cost af 1.5%aleulate the net proceed if the spot exchange rate in Jun is $/ 1.76 (US 3-month interest Pare Points) 12%) (15 1) A US firm makes sales to a British firm in March but the British firm is going to pay 1,000,000 to the US firm in June, which is 3 months later. a) Suppose that the spot rate in March is $/ 1.7640 and the 3-month forward rate is $/ 1.7540 and the 3-month British borrowing rate is 10 %. Calculate the break even interest rate that makes you indifferent between money market hedge and forward contract. (10 Points) Spot rateb/ 1-7640 Folunid: 000001540o =7541o00 10 14= Foruculd= letL9540 2-5.1 1/000,000 1+.095 45, 610 20916 41954, 000 61,120,46 -I.DI42 10 40 b) If the settled rate of the option contract is $/E 175.with a premium cost of 1.5%, galculate the net proceed if the spot exchange rate in June is $/ 1.76 (0S 3-month interest rate is 12% (15 Points)
