Firm is concerned about its currency risk

Assignment Help Financial Management

Reference no: EM131178759

The U. S- based MNC Kline has payables of CHF 250,000 in nine months. The firm’s economist forecasts that the CHFUSD could end the period with a value of either 1.10 (probability of 55 percent) or 1.00 (45 percent). The firm is concerned about its currency risk. It has also assessed some hedging alternatives. Nine- month CHFUSD forward contracts are traded at 1.06. The nine- month interest rates (annual compounding) in the United States and Switzerland are 1.5 percent and 0.5 percent, respectively. Call options with nine- month expiration and a strike price of USD 1.07 are available for a premium of USD 0.037. Assume that the spot rate is USD 1.05. What is the expected cost (and the corresponding standard deviation) if company doesn’t hedge? (use $x,xxx and $x,xxx)

Reference no: EM131178759

Questions Cloud

Prove if a statement proved by strong mathematical induction : Prove that if a statement can be proved by strong mathematical induction

What pricing strategies do phone handset manufacturers use : What is the market structure for wireless handset manufacturers? What pricing strategies do wireless phone handset manufacturers use? How do wireless phone makers attempt to differentiate their handset offerings?

Resource consumption and global environmental impact : Humans are constantly innovating ways to produce and consume material resources. What effect does population have on resource consumption and global environmental impact? In what ways has technology contributed to consumption overpopulation? Can you ..

Total value of the coins : Kevin and Randy Muise have a jar containing 50 coins, all of which are either quarters or nickels. The total value of the coins in the jar is $9.30. How many of each type of coin do they have?

Firm is concerned about its currency risk : The U. S- based MNC Kline has payables of CHF 250,000 in nine months. The firm’s economist forecasts that the CHFUSD could end the period with a value of either 1.10 (probability of 55 percent) or 1.00 (45 percent). The firm is concerned about its cu..

Write case study report on woolthworths limited : Write 1200 word Case study report on woolthworths limited, in regards to job cuts, difficulties within the last 6-12 months, MUST BE WRITTEN IN THE THIRD PERSON

Create a project management plan for your client : Create a project management plan for your client that outlines how you will implement the HRIS in Gladwell Grocery Stores. Explain the various steps that should be included to ensure that the implementation runs smoothly.

Down-sloping yield curve indicates : An investment banker overprices an issue in order to satisfy the corporate issuer. A Treasury bill is a long-term obligation of the federal government. A down-sloping yield curve indicates: What effect, if any, will a decrease in interest rates have ..

Which of the given statements is correct : What are most often involved in perpetuating fraudulent financial reporting.- Internal control is a process designed to achieve objectives in:

User Account

All Pages