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Show all working, zero mark if calculations are not shown Part A A Canadian company is planning on using a money market hedge to hedge
Show all working, zero mark if calculations are not shown Part A A Canadian company is planning on using a money market hedge to hedge its payable of 300,000 euros. The current deposit rate, for the euro is 5% and the deposit rate for the Canadian is 6%. The lending rate for the euro is 4% and the Canadian lending rate is 8%. The current spot rate for the euro is 1.53, the future spot rate is $1.51 and the forward rate is 1.52. The payable is due in 12 months. Calculate how much it would cost the company to hedge with the money market? 5 marks Part B The Canadian company has payable of 300,000 euros. The current spot rate for the euro is 1.53, the future spot rate is $1.51 and the forward rate is 1.52. How much it would cost the company to hedge with the forward contract? 4 Marks Which is beneficial for the company? 1 mark
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