The following scenario relates to 5 questions ON Cowhose nome currency is the dollar, has exported products to Europe for several years and all European outomers pay on a credit baner it no plans to invest in a European storage, packing and distribution network The eatment will cost 13 mon and is to be financed by equal amounts of equity and debt The debt france will be provided by an immediate 05 mon loan note issue. The derest rate on the loan note issue is 8% per year, with annual interest being payable 2 instaments in euros on a slemonly basis of 260,000 The equity finance will be raised via an immediate rights issue in GN's home country to raise $5 million after issue costs of $300,000. GN's current share price is $2.50 per share and the rights issue would be made at a 20% discount Euros to $1 The spot exchange rate 1.3050 1.3112 The six-month forward rate 1.2876-1.2902 Money market rates available to GN Go One-year euro interest rates: One-year dollar interest rates: Borrowing 6% 4% Deposit 5% 3% What should GN Co do in dollars now to correctly set up a money market hedge on the payment of Interest expected in six months' time? Gelat Borrow $104,374 Bow $19,740 Deposit $187,067 De 192,516 The following scenario relates to 5 questions ON Cowhose nome currency is the dollar, has exported products to Europe for several years and all European outomers pay on a credit baner it no plans to invest in a European storage, packing and distribution network The eatment will cost 13 mon and is to be financed by equal amounts of equity and debt The debt france will be provided by an immediate 05 mon loan note issue. The derest rate on the loan note issue is 8% per year, with annual interest being payable 2 instaments in euros on a slemonly basis of 260,000 The equity finance will be raised via an immediate rights issue in GN's home country to raise $5 million after issue costs of $300,000. GN's current share price is $2.50 per share and the rights issue would be made at a 20% discount Euros to $1 The spot exchange rate 1.3050 1.3112 The six-month forward rate 1.2876-1.2902 Money market rates available to GN Go One-year euro interest rates: One-year dollar interest rates: Borrowing 6% 4% Deposit 5% 3% What should GN Co do in dollars now to correctly set up a money market hedge on the payment of Interest expected in six months' time? Gelat Borrow $104,374 Bow $19,740 Deposit $187,067 De 192,516
