Should samuel short or long forward contract

Assignment Help Financial Management

Reference no: EM131553339

Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the Australian dollar/Singapore dollar (A$/S$) cross-rate. The current spot rate is A$0.8000/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the Australian dollar in the coming 90 days, probably to about A$0.8800/S$.

Peregrine Investments has a credit rating of AA. The LIBOR rate for Australian dollars is 3% and the LIBOR rate for Singapore dollars is 1%. If Peregrine Investments is to borrow funds in Australian dollars or Singapore dollars they will face a spread of +2% above the LIBOR rate.

a) Should Samuel short or long a forward contract for 500,000 Singapore dollars and has 90 days left to maturity?

b) What is Samuel's cost to short or long the forward contract used in a) has a settlement price of A$0.82000/S$ today?

c) What is Samuel's profit or loss if the ending 90 day spot rate is indeed A$0.8800/S$?

Reference no: EM131553339

Questions Cloud

Find the present value of growth opportunities per share : Find the present value of growth opportunities [PVGO] per share of stock for Video Inc.

Quality customer service adds value : “Quality customer service adds value”. Using this case study as an example, discuss this statement.

Customer service evaluation report : Customer Service Evaluation Report Assume you are a customer of two different organisations. Outline the factors that contribute to good customer service.

Definition of what kind of investment the purchase of stock : Summarize the concept of investing in stocks. what type of investors are best suited for stock market investing.

Should samuel short or long forward contract : Should Samuel short or long a forward contract for 500,000 Singapore dollars and has 90 days left to maturity?

Define the future value : At age 35 you invest $1,600 that earns 11.5 percent per year. In which case would you have more money at age 60?

Find the interest contained in the installment : Find the interest contained in the installment due 5 years before the last installment.

Interest-on-interest : Interest-on-Interest Consider a $2,000 deposit earning 6 percent interest per year for 5 years.

Two growing perpetuities has the same yield rate : Two growing perpetuities has the same yield rate. the first one: a perpetuity-immediate, has an initial payment of 1000 one year from now.

User Account

All Pages