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 franc-denominated receivable with a one-year maturity. U.S. $ equiv. Currency per U.S. $ Contract Size Country £ 10,000 Britain (pound) $ 1.9600 £ 0.5102 interest APR 12 months forward $ 2.0000 £ 0.5000 rates € 10,000 Euro $ 1.5600 € 0.6410 i$ = 4% 12 months forward $ 1.6000 € 0.6250 i€ = 3% SFr. 10,000 Swiss franc $ 0.9200 SFr. 1.0870 i₤ = 2% 12 months forward $ 1.0000 SFr. 1.0000 isFr. = 1% The following were computed without rounding. Select the answer closest to yours. SFr. 2,000,000 SFr. 2,151,118.62 SFr. 2,068,383.28 SFr. 1,921,941.75 SFr. 2,109,548.17
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 franc-denominated receivable with a one-year maturity. U.S. $ equiv. Currency per U.S. $ Contract Size Country £ 10,000 Britain (pound) $ 1.9600 £ 0.5102 interest APR 12 months forward $ 2.0000 £ 0.5000 rates € 10,000 Euro $ 1.5600 € 0.6410 i$ = 4% 12 months forward $ 1.6000 € 0.6250 i€ = 3% SFr. 10,000 Swiss franc $ 0.9200 SFr. 1.0870 i₤ = 2% 12 months forward $ 1.0000 SFr. 1.0000 isFr. = 1% The following were computed without rounding. Select the answer closest to yours. SFr. 2,000,000 SFr. 2,151,118.62 SFr. 2,068,383.28 SFr. 1,921,941.75 SFr. 2,109,548.17
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 4ST
Related questions
Question
pm.3
Transcribed Image Text: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 franc-denominated
receivable with a one-year maturity.
U.S. $ equiv. Currency per U.S. $
Contract Size Country
£
10,000 Britain (pound)
$ 1.9600
£
0.5102
interest APR
12 months forward $ 2.0000 £
0.5000
rates
€
10,000 Euro
$ 1.5600
€
0.6410
i$
= 4%
12 months forward $ 1.6000
€
0.6250
i€
= 3%
SFr. 10,000 Swiss franc
$ 0.9200
SFr.
1.0870
i₤
= 2%
12 months forward $ 1.0000 SFr.
1.0000
isFr.
= 1%
The following were computed without rounding. Select the answer closest to yours.
SFr. 2,000,000
SFr. 2,151,118.62
SFr. 2,068,383.28
SFr. 1,921,941.75
SFr. 2,109,548.17
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