Proctor and Gamble's affiliate in India, P&G India, procures much of its toiletries product line from a Japanese company. Because of the shortage of working capital in India, payment terms by Indian importers are typically 180 days or longer. P & G India wishes to hedge a 8.5 million Japanese yen payable. Although options are not available on the Indian rupee (Rs), forward rates are available against the yen. Additionally, a common practice in India is for companies like P & G India to work with a currency agent who wil, in this case, lock in the current spot exchange rate in exchange for a 4.85% fee. Using the following exchange rate and interest rate data, recommend a hedging strategy Assumptions Values 180-day account payable, Japanese yen () 8,500,000 Spot rate (\/$) Spot rate, rupees/dollar (Rs/S) 120.00 48.00 180-day forward rate (/Rs) 2.4000 2.6000 Expected spot rate in 180 days (\/Rs) 180-day Indian rupee investing rate 180-day Japanese yen investing rate Currency agent's exchange rate fee P& G India's cost of capital 8.000% 1.500% 4.850% 12.00% Please select a right answer and fill in. The implied cross rate of Yen/Rupee 2.4 a. 2.3 b.2.4 c. 2.5 d. 2.6 e. 2.7 f. 2.8 P and India sell a Yen forward a. buy a Yen forward b. sell a Yen forward c. borrow 8.5 millio now. a. buy a yen call and buy a yen put b. buy a yen call and sell a yen put c. sell a yen call and buy a yen put d. sell a yen call and sell a If there exists a market of currency market of Yen denominated in rupees, P and India should hedge the yen risk by yen put. Please calculate the present value of cash flow if P&H India uses the agent and fixed exchange rate (Hint: Consider one half of the cost of capital as the discount rate and add the fixed fee 4.85%) Proctor and Gamble's affiliate in India, P&G India, procures much of its toiletries product line from a Japanese company. Because of the shortage of working capital in India, payment terms by Indian importers are typically 180 days or longer. P & G India wishes to hedge a 8.5 million Japanese yen payable. Although options are not available on the Indian rupee (Rs), forward rates are available against the yen. Additionally, a common practice in India is for companies like P & G India to work with a currency agent who wil, in this case, lock in the current spot exchange rate in exchange for a 4.85% fee. Using the following exchange rate and interest rate data, recommend a hedging strategy Assumptions Values 180-day account payable, Japanese yen () 8,500,000 Spot rate (\/$) Spot rate, rupees/dollar (Rs/S) 120.00 48.00 180-day forward rate (/Rs) 2.4000 2.6000 Expected spot rate in 180 days (\/Rs) 180-day Indian rupee investing rate 180-day Japanese yen investing rate Currency agent's exchange rate fee P& G India's cost of capital 8.000% 1.500% 4.850% 12.00% Please select a right answer and fill in. The implied cross rate of Yen/Rupee 2.4 a. 2.3 b.2.4 c. 2.5 d. 2.6 e. 2.7 f. 2.8 P and India sell a Yen forward a. buy a Yen forward b. sell a Yen forward c. borrow 8.5 millio now. a. buy a yen call and buy a yen put b. buy a yen call and sell a yen put c. sell a yen call and buy a yen put d. sell a yen call and sell a If there exists a market of currency market of Yen denominated in rupees, P and India should hedge the yen risk by yen put. Please calculate the present value of cash flow if P&H India uses the agent and fixed exchange rate (Hint: Consider one half of the cost of capital as the discount rate and add the fixed fee 4.85%)
