Payable using money market hedge

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Reference no: EM132039206

1. Compaq Computer has £1 million payable that it expects to pay in one year. Suppose the interest rate on pounds is 15% and the spot exchange rate is 1.5$/£. How could Compaq protect this payable using a money market hedge?

a) Borrow £1 million pounds today.

b) Borrow $1,500,000 today

c) Borrow £869,565 pounds today.

d) Borrow $1,304,348 today

e) None of the above.

2. Kar’s currently has a 208-day operating cycle. The company is concentrating on increasing its inventory turnover rate from 7.9 to 8.2 times. What will the firm's new operating cycle be if it can effectively make this change?

207.14 days

209.69 days

206.31 days

208.86 days

207.64 days

Reference no: EM132039206

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