Business

What is the hedged value of American’s ticket sales using a forward market hedge? American Airlines is trying to decide how to go about hedging SFr70 million in ticket sales receivable in 180 days. Suppose it faces the following exchange and interest rates. Spot rate: $0.6433-42/SFr Forward rate (180 days): $0.6578-99/SFr Swiss Franc 180-day interest […]

Should this affect its decision of whether to hedge its sterling note? Cooper Inc., a U.S. firm, has just invested £500,000 in a note that will come due in 90 days and is yielding 9.5% annualized. The current spot value of the pound is $1.5612, and the 90-day forward rate is $1.5467. a. What is

Cooper anticipates that the value of the pound in 90 days will be $1.5550. Should it hedge? Why or why not? Cooper Inc., a U.S. firm, has just invested £500,000 in a note that will come due in 90 days and is yielding 9.5% annualized. The current spot value of the pound is $1.5612, and

What is the annualized dollar yield on the hedged note? Cooper Inc., a U.S. firm, has just invested £500,000 in a note that will come due in 90 days and is yielding 9.5% annualized. The current spot value of the pound is $1.5612, and the 90-day forward rate is $1.5467. a. What is the hedged

What is the hedged dollar value of this note at maturity? Cooper Inc., a U.S. firm, has just invested £500,000 in a note that will come due in 90 days and is yielding 9.5% annualized. The current spot value of the pound is $1.5612, and the 90-day forward rate is $1.5467. a. What is the

At what forward rate would interest rate parity hold given the interest rates? Magnetronics, Inc., a U.S. company, owes its Taiwanese supplier NT$205 million in three months. The company wishes to hedge its NT$ payable. The current spot rate is NT$1 = U.S.$0.03987, and the three-month forward rate is NT$1 = U.S.$0.04051. Magnetronics can also

Describe the procedure it would use to get this price. Magnetronics, Inc., a U.S. company, owes its Taiwanese supplier NT$205 million in three months. The company wishes to hedge its NT$ payable. The current spot rate is NT$1 = U.S.$0.03987, and the three-month forward rate is NT$1 = U.S.$0.04051. Magnetronics can also borrow or lend

What is the minimum U.S. dollar cost that Magnetronics can lock in for this payable? Magnetronics, Inc., a U.S. company, owes its Taiwanese supplier NT$205 million in three months. The company wishes to hedge its NT$ payable. The current spot rate is NT$1 = U.S.$0.03987, and the three-month forward rate is NT$1 = U.S.$0.04051. Magnetronics

What is the U.S. dollar accounting entry for this payable? Magnetronics, Inc., a U.S. company, owes its Taiwanese supplier NT$205 million in three months. The company wishes to hedge its NT$ payable. The current spot rate is NT$1 = U.S.$0.03987, and the three-month forward rate is NT$1 = U.S.$0.04051. Magnetronics can also borrow or lend

What was the true cost of the forward contract? An investment manager hedges a portfolio of Bunds (German government bonds) with a six-month forward contract. The current spot rate is €0.84/$, and the 180-day forward rate is €0.81/$. At the end of the six-month period, the Bunds have risen in value by 3.75% (in euro