Question
Your company a U.S.-based company has sales in Europe, Asia, and the Americas thus you have receivables in different currencies. In November, your company delivered
Your company a U.S.-based company has sales in Europe, Asia, and the Americas thus you have receivables in different currencies. In November, your company delivered a shipment of your products to a major distributor in Antwerp. The receivable, 20 million, is due in 90 days, standard terms for the industry in Europe. Your treasury team has collected the following currency and market quotes. The companys foreign exchange advisors believe the currency will be at about $1.1904/ in 90 days. Management does not use currency options in currency risk management activities. Decide on which hedging alternative is probably preferable.
Assumptions | |
Current Spot ($/) | $1.1877 |
90-day US interest rate | 3.000% |
90-day euro interest rate | 3.750% |
90-day US borrowing rate | 4.250% |
90-day euro borrowing rate | 5.750% |
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