Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months. What is the expected value of payables in AUD under hedge?

Q: n the spot and two-year forward rates for the British pound are $2.00 and $1.95, respectively and…

A: Exchange rate between two countries change according to change in the interest rates into the…

Q: Suppose you exported something from Mexico to the US and were quoted a price (payable immediately)…

A: Export: A product or service that is manufactured in one nation but sold to a buyer in another…

Q: An Omani importer will receive commodities from USA and he has to pay an amount of USD 250,000 next…

A: The answer is option (d) [ i.e Forward market]  Refer step 2 for explanation

Q: n investor has

A: Given information : Amount available for investment $2,000,000 US interest rate 2% German…

Q: Suppose the spot exchange rate for the Hungarian Forint is HUF 209/USD. The infiation rate in the US…

A: The following information has been provided in the question: Spot exchange rate for Hungarian…

Q: Suppose one-year US Treasury bill pays 2.28% and one-year Canadian Treasury bill pays 0.95%. The…

A: Arbitrage is a process to earn profit by purchasing one security from the market and selling another…

Q: Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months.…

A: Expected spot rate is the rate at which an investor expects the currency to be traded after a…

Q: Suppose you, a German importer, expect to pay $1 million in 90 days for taking delivery of import…

A:

Q: Assume that Stevens Point Co. has net receivables of 150,000 Singapore dollars in 90 days.  The spot…

A: Forward hedge is an agreement to buy or sell an asset at some future date at a stated price in…

Q: Credible Research sold a microchip to the Vausten Institute in Germany on credit and invoiced €10…

A: Solution- (1)- Avilable under a previous contract=External Receivables *Transfer Rate…

Q: Assume that Riverside Corp. from the United States will receive 400,000 pounds in 180 days. The…

A: Solution :  Money Market Hedge help a domestic company in reducing the exchange rate and currency…

Q: ABC Company, an Australian firm, has a USD 385 million payable in one year. ABC is concerned that…

A: If the exchange rate increases then ABC company has to pay more Australian dollars because liability…

Q: Assume that Riverside Corp. from the United States will receive 400,000 pounds in 180 days. The…

A: Solution : Money Market Hedge is that technique which provide the protection against loss which…

Q: A product sells for $1,000 in the U.S. If the exchange rate between $ and euro is $1 = 0.90 euro,…

A: Given data; Price of product in US = $1,000 Exchange rate between dollar and Euro = $1 = 0.90 euros

Q: Assume that Hampshire Co. has net payables of 200,000 Mexican pesos in 180 days. The Mexican…

A: Money market hedge is using money market to hedge the risk from foreign currency fluctuations

Q: Suppose that the current EUR/GBP rate is 0.6674 and the one-year forward exchange rate is 0.6748.…

A:

Q: You are a Canadian exporter expecting a payment of USD 1M in three months. You want to hedge your…

A: As the Canadian exporters have speculated that the exchange rate might go up in the future,

Q: A Japanese firm has a contract to buy equipment from a US manufacturer for $2.20m in 30 days.  The…

A: Risk hedging and management is the technique of risk reduction. In the international financial…

Q: Sweden (krona) SEK 8.4976 8.4388 8.3886 8.2836

A: Compute cost of covering of liability to pay Swedish kronor to a Swedish company after one year by…

Q: The 6-month interest rate in the US is 12.25% p.a. The 6-month interest rate in Canada is 15.25%…

A: Solution :  Under Interest rate Arbitrage we should take the loan from Lower rate interest country…

Q: Consider a US company, GateCorp, that exports products to the United Kingdom. GateCorp has just…

A: A forward contract: A forward contract is a contract in which two parties agree to exchange an asset…

Q: The two-month interest rates with continuous compounding in Australia and the United States are 4.2%…

A: An arbitrage is referred to as the practice of taking the benefits of the price that have the…

Q: t and two-year forward rates for the British pound are $2.00 and $1.95, respectively and are $1.40…

A: Interest rate and exchange rates are related to each other and there are changes according to that.

Q: An U.S. firm requires C$230,000 in 90 days to pay the imports from Canada. To avoid currency…

A: Whenever there is an involvement of foreign currency in the transaction, it results in foreign…

Q: U.S. deposit rate for 1 year = 11.5% U.S. borrowing rate for 1 year = 12% Swiss deposit rate…

A: Here, US exporter is receiving Swiss franc in one year. So, exporter has receivables from Swiss.…

Q: Suppose you are expecting to receive a million british pounds in six months,and you agree to a…

A: $1.5832=£1, means give one pound and take $1.5832. Here pound has been taken in the base currency…

Q: If the Australian/US dollar exchange rate is 0.72 USD/AUD, US interest rates are 0.25% and…

A: Given data; Australian /US dollar exchange rate = 0.72 USD/AUD US interest rate = 0.25% Australian…

Q: Assume Switzerland has a one-year interest rate of 3% and that of Ghana is 16%. If the International…

A: The theory of International Fisher's Effect suggests that the spot exchange rate should change to…

Q: Suppose the spot rate of the yen today is $0.0100 while the three-month forward rate is $0.0096. How…

A: The spot rate is lower than the forward rate, implying that the currency is trading at a premium.…

Q: A U.S. investor obtains Ghana cedis when the cedi is worth $.33 and invests in a one-year money…

A: The selling price of foreign market security = $0.26 The purchase price of foreign market security =…

Q: The one-year interest rate in Australia is given as 0.5% and the one year interest rate in New…

A:

Q: investor has $2m to invest and has the option of placing it in a us bank account paying 2% annually,…

A:

Q: Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months.…

A: Exercise rate is the rate at which the currency will be exchanged for other currency in derivatives…

Q: Assume that Stevens Point Co. has net receivables of 100,000 Singapore dollars in 90 days. The spot…

A: Money market hedge is using money market to hedge the risk of change in foreign currency…

Q: Assume you are in India and borrowed 800,000 Rs from one of your friends who lives in Australia.…

A: Interest free foreign currency loans are generally lent by one country to another(generally…

Q: A Japanese firm has a contract to buy equipment from a US manufacturer for $2.20m in 30 days.  The…

A: The risk in the international financial market is the situation of gain or loss that arises due to…

Q: The current spot rate is $0.80/A$ and the six-month forward rate is $0.7775/A$. One-year interest is…

A: Here, Current Spot Rate is  $0.80/A$ Six-month forward rate is $0.7775/A$ One year interest rate in…

Q: ider a U.S.-based company that exports goods to Switzerland. The U.S. Company expects to receive…

A: In this we need to calculate the forward rate based on the interest rate prevailing in both…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.