Question
Your firm is a Swiss exporter of bicycles. You have sold an order to a British firm for 1,000,000 worth of bicycles. Payment from the
Your firm is a Swiss exporter of bicycles. You have sold an order to a British firm for 1,000,000 worth of bicycles. Payment from the British firm (in pounds sterling) is due in 12 months. Use a money market hedge to redenominate this one-year receivable into a euro-denominated receivable with a one-year maturity.
Contract Size | Country | US$ equiv | currency per US$ | Interest APR Rates |
10,000 | pound 12 mth forward | $1.9600 $2.0000 | 0.5102 0.5000 | i$ = 1% i = 3% |
10,000 | euro 12 mth forward | $1.5600 $1.6000 | 0.6410 0.6250 | i = 2% |
SFr 10,000 | SFr 12 mth forward | $0.9200 $1.0000 | SFr1.0870 SFr1.0000 | iSFr = 4% |
The following were computed without rounding. Select the answer closest to yours.
A) SFr. 2,000,000
B) SFr. 2,151,118.62
C) SFr. 2,068,383.28
D) SFr. 1,921,941.75
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