Question
The Kasapreko Company Limited has a debt of nzd 100,000, which is repayable in twelve months. The companys controller, Kweku Manu is having trouble sleepless
The Kasapreko Company Limited has a debt of nzd 100,000, which is repayable in twelve months. The companys controller, Kweku Manu is having trouble sleepless at night knowing that the debt is unhedged. The current ghs/nzd exchange rate is 20, and p.a. interest rates are 21 percent on ghs and 10 percent on nzd. Kweku is considering a forward hedge (at Ft,T = 20 1.21/1.10 = 22), but a friend tells him that he recently bought a call on nzd 100,000 with X = 20, and is willing to sell it to him at the historic cost, ghs 1 per nzd or ghs 100,000 for the total contract. What should he do?
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