The firm executes a money market hedge

Assignment Help Financial Management
Reference no: EM131506434

Assume the following information:

     U.S. deposit rate for 1 year                       =  11%

     U.S. borrowing rate for 1 year                   =  12%

     New Zealand deposit rate for 1 year          =    8%

     New Zealand borrowing rate for 1 year      =  10%

     New Zealand dollar forward rate for 1 year =  $.40

     New Zealand dollar spot rate                     =  $.39

Also assume that a U.S. exporter denominates its New Zealand exports in NZ$ and expects to receive NZ$600,000 in 90 days. You are a consultant for this firm.

Using the information above, what will be the approximate value of these exports in 90 days in U.S. dollars given that the firm executes a money market hedge?

Reference no: EM131506434

Questions Cloud

What is the updated value of the bond : the market rates are cut down by 50 basis points. What is the updated value of the bond?
What is advances pretax cost of debt : Advance, Inc., is trying to determine its cost of debt. What is Advance's pretax cost of debt?
What was the foreign exchange loss incurred on transaction : what was the foreign exchange loss incurred on the transaction?
Calculate the treasury bonds after-tax yield : If the bank’s tax rate is 20 percent, calculate the Treasury bond's after-tax yield.
The firm executes a money market hedge : what will be the approximate value of these exports in 90 days in U.S. dollars given that the firm executes a money market hedge?
Money market funds generally have check writing privelages : Money Market funds generally have check writing privelages.
What is present value of your windfall : What is the present value of your windfall? What is the future value of your windfall in three years.
Active managers seek to outperform the market by : Active managers seek to outperform the market by
What does the triple bottom line mean for a company : What are the three frameworks of the triple bottom line? What does the triple bottom line mean for a company?

Reviews

Write a Review

Financial Management Questions & Answers

  Compute the value of this stock with a required return

A firm is expected to pay a dividend of $2.65 next year and $2.80 the following year. Financial analysts believe the stock will be at their price target of $45 in two years. Compute the value of this stock with a required return of 12.6 percent.

  Hedge through covered interest arbitrage

You are expecting to receive 10M Euros 3-months from now. The interest rates are 3% in the US and 5% in Germany. Current spot exchange rate: $1.20/Euro and 3-month Forward rates: $1.15/Euro. How much $ will you have 3-months from now if you hedge thr..

  The operating cost of a new machine

The operating cost of a new machine is $500 for the first year. Starting the second year, the operating cost increases by $200 per year for the next 10 years. Calculate the equivalent annual operating cost of the machine. What will be the present and..

  What will be the credit for the seller

The amount required to fill the tank was 127.50 gallons at $5.37 per gallon. On this statement of adjustment, what will be the credit for the seller.

  Describe how a firmrsquos net working capital nwc is

1.what are financial ratios and why are they useful?2.what are the three types of comparisons that can be made when

  What is the companys horizon value

What is the company’s horizon value?

  What are the capital gains yield and dividend yield

We have a common stock which has a dividend which grows at 100%for the first 1 year and 200% for the next 1 year. After that it rises more reasonably, but we only know it indirectly. Net profit margin, ATO and financial leverage are .02, 3 and 2 resp..

  What would the value be if payments occurred forever

An investment offers $6,200 per year for 20 years, with the first payment occurring one year from now. If the required return is 7 percent, what is the value of the investment? What would the value be if the payments occurred for 45 years? What would..

  State of economy probability of state of economy stock

Consider the following information: Rate of return if state occurs State of Economy Probability of state of economy Stock A Stock B Stock C What is the expected return on an equally weighted portfolio of these three stocks? What is the variance of a ..

  Research equipment and certain special tools

In your new position as head accountant (so OK – you’re the only accountant but it will sound better on your resume) working for Mr. Moore, you note that last month on July 2, 2013, they bought “research equipment and certain special tools” for $60,0..

  Tax basis in stock after the distribution

Jayhawk Company reports current E&P of $317,500 and accumulated E&P of negative $295,000. Jayhawk distributed $480,000 to its sole shareholder, Christine Rock, on the last day of the year. Christine’s tax basis in her Jayhawk stock is $99,250. What i..

  Companys customers owe for items purchased on credit

Consider the following balance sheet data for Kristy’s Party Supply: Cash $ 92,000 Accounts payable $ 75,000 Accounts receivable 145,000 Notes payable 94,000 Retained earnings 250,000 Total assets $ 1,068,000 Total liabilities & equity $ 1,068,000 Ho..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd