Implements money market hedge

Assignment Help Financial Management

Reference no: EM132040736

Narto Co. (a U.S. firm) exports to Switzerland and expects to receive 500,000 Swiss francs in one year. The one-year U.S. interest rate is 5% when investing funds and 7% when borrowing funds. The one-year Swiss interest rate is 4% when investing funds, and 6% when borrowing funds. The spot rate of the Swiss franc is $.80. Narto expects that the spot rate of the Swiss franc will be $.72 in one year. There is a put option available on Swiss francs with an exercise price of $.76 and a premium of $.03.

1. Determine the amount of dollars that Narto Co. will receive at the end of one year if it implements a money market hedge.

2. Determine the amount of dollars that Narto Co. expects to receive at the end of one year (after accounting for the option premium) if it implements a put option hedge.

Reference no: EM132040736

Questions Cloud

Analyzes the addition of sandals to its lineup : What amount should Blue Shoe use as the annual estimated sales revenue when it analyzes the addition of sandals to its lineup?

Discuss about the project management program : Imagine that you are writing a scholarly paper for consumption by a new undergraduate student in the project management program.

What is the difference between tax avoidance : What is the difference between tax avoidance, tax evasion to me they seem to be the same thing?

Prepare journal entries to record the transactions : Lourdes Yabar opened a computer repair business on May 1, 2016. Prepare journal entries to record the above transactions

Implements money market hedge : Determine the amount of dollars that Narto Co. will receive at the end of one year if it implements a money market hedge.

Medical management guidelines for methylene chloride : What health concerns are identified on the Medical Management Guidelines for methylene chloride?

Discuss music development in childhood and adolescence : You will select Rap and R&B music that had an effect throughout your development. You may even discuss what your family may have been listening.

What qualities did he or she lack that better managers have : What made him/her exceptional? What qualities did he/she have that other managers you've experienced not have?

Compute janice income elasticity of demand : Janice earns an income of $2,000 a week and goes out to lunch 3 times a week. If her income increased to $2,100 she would go out to lunch 4 times a week.

User Account

All Pages