What would the return on the Bunds have been without hedging? 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% […]
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If the Bunds earn interest at the annual rate of 5%, paid semiannually, what is the investment manager’s total dollar return on the hedged Bunds? 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
If the forward rate remains at $1.12, will this new assessment affect the trader’s decision? A foreign exchange trader assesses the euro exchange rate three months hence as follows: $1.11 with probability 0.25 $1.13 with probability 0.50 $1.15 with probability 0.25 The 90-day forward rate is $0.12. a. Will the trader buy or sell euros
what is likely to limit the trader’s speculative activities? A foreign exchange trader assesses the euro exchange rate three months hence as follows: $1.11 with probability 0.25 $1.13 with probability 0.50 $1.15 with probability 0.25 The 90-day forward rate is $0.12. a. Will the trader buy or sell euros forward against the dollar if she
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Will the trader buy or sell euros forward against the dollar if she is concerned solely with expected values? A foreign exchange trader assesses the euro exchange rate three months hence as follows: $1.11 with probability 0.25 $1.13 with probability 0.50 $1.15 with probability 0.25 The 90-day forward rate is $0.12. a. Will the trader
What factors will influence the hedging decision? Walt Disney expects to receive a Mex$16 million theatrical fee from Mexico in 90 days. The current spot rate is $0.1321/Mex$, and the 90-day forward rate is $0.1242/Mex$. a. What is Disney’s peso transaction exposure associated with this fee? b. If the spot rate expected in 90 days
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What is the hedged dollar value of the fee? Walt Disney expects to receive a Mex$16 million theatrical fee from Mexico in 90 days. The current spot rate is $0.1321/Mex$, and the 90-day forward rate is $0.1242/Mex$. a. What is Disney’s peso transaction exposure associated with this fee? b. If the spot rate expected in
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If the spot rate expected in 90 days is $0.1305, what is the expected U.S. dollar value of the fee? Walt Disney expects to receive a Mex$16 million theatrical fee from Mexico in 90 days. The current spot rate is $0.1321/Mex$, and the 90-day forward rate is $0.1242/Mex$. a. What is Disney’s peso transaction exposure
What is Disney’s peso transaction exposure associated with this fee? Walt Disney expects to receive a Mex$16 million theatrical fee from Mexico in 90 days. The current spot rate is $0.1321/Mex$, and the 90-day forward rate is $0.1242/Mex$. a. What is Disney’s peso transaction exposure associated with this fee? b. If the spot rate expected
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If it uses the funds to increase its cash position? Zapata Auto Parts, the Mexican affiliate of American Diversified, Inc., had the following balance sheet on January 1: Assets (Mex$ Millions) Liabilities (Mex$ Millions) Cash, marketable securities Mex$1,000 Current liabilities Mex$47,000 Accounts receivable 50,000 Long-term debt 12,000 Inventory 32,000 Equity 135,000 Net fixed assets 111,000
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