Question
In: Finance
Your U.S. based company has purchased equipment from a German manufacturer worth €10,000,000 that is payable...
Your U.S. based company has purchased equipment from a German manufacturer worth €10,000,000 that is payable in one year. The current spot rate S(EUR/USD) is $1.13 and the F12(EUR/USD) is $1.1037. The US interest rate is 5 percent and the German interest rate is 7.5 percent. Additionally, a call to buy euros at a strike price $1.11 in 12 months has a premium of $0.0007 per euro and a put at the same strike price have a premium of $0.003. Show the actions you would take and the net cost of the purchase in USD at the time the obligation is due using:
a) the forward market
b) a money market hedge
c) an options contract if the S12 (EUR/USD) is $1.19
d) an options contract if the S12 (EUR/USD) is $1.09.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Cap Inc., a U.S. manufacturer, purchased computers from a German seller for €4,000,000, payment to be...
Cap Inc., a U.S. manufacturer, purchased computers from a German
seller for €4,000,000, payment to be made in 1 year. . The spot
rate and the one year forward rates between the dollar and the Euro
are $1.2403/€ and $1.2456/€ respectively. One-year put options on
the Euro are available with an exercise price of $1.30/€ and a
premium of $0.05/€. One-year call options on the Euro are available
with an exercise price of $1.30/€ and a premium of $0.07/€. Would...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of
industrial equipment, just purchased a Korean company that
produces plastic nuts and bolts for heavy equipment. The purchase
price was Won7,900 million. Won1,000 million has already been
paid, and the remaining Won6,900 million is due in six months. The
current spot rate is Won1,103/$, and the 6-month forward rate is
Won1,163/$. The 6-month Korean won interest rate is 17% per
annum, the 6-month U.S. dollar rate is 4.5% per annum. Bobcat can
invest...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of
industrial equipment, just purchased a Korean company that
produces plastic nuts and bolts for heavy equipment. The purchase
price was Won 7,800 million. Won1,000 million has already
beenpaid, and the remaining Won 6,800 million is due in six
months. The current spot rate is Won 1,105/$, and the 6-month
forward rate is Won1,106/$. The 6-month Korean won interest rate
is 16.5% perannum, the 6-month U.S. dollar rate is 3% per annum.
Bobcat can...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of
industrial equipment, just purchased a Korean company that produces
plastic nuts and bolts for heavy equipment. The purchase price was
Won 7,800 million. Won 1,000 million has already been paid, and the
remaining Won 6,800 million is due in six months. The current spot
rate is Won 1,113 /$, and the 6-month forward rate is Won1,162 /$.
The 6-month Korean won interest rate is 16 % per annum, the 6-month
U.S. dollar rate...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of
industrial equipment, just purchased a Korean company that produces
plastic nuts and bolts for heavy equipment. The purchase price was
Won 7,800 million. Won 1,000 million has already been paid, and the
remaining Won 6,800 million is due in six months. The current spot
rate is Won 1,113 /$, and the 6-month forward rate is Won1,162 /$.
The 6-month Korean won interest rate is 16 % per annum, the 6-month
U.S. dollar rate...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of
industrial equipment, just purchased a Korean company that
produces plastic nuts and bolts for heavy equipment. The purchase
price was Won7,700million. Won1,000 million has already been
paid, and the remaining Won6,700 million is due in six months. The
current spot rate is Won 1,111/$, and the 6-month forward rate is
Won1,161/$. The 6-month Korean won interest rate is 16% per
annum, the 6-month U.S. dollar rate is 3.5% per annum. Bobcat can
invest...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of
industrial equipment, just purchased a Korean company that
produces plastic nuts and bolts for heavy equipment. The purchase
price was Won 7,900 million. Won 1,000 million has already
beenpaid, and the remaining Won 6,900 million is due in six
months. The current spot rate is Won 1,119/$, and the 6-month
forward rate is Won 1,174/$. The 6-month Korean won interest rate
is 15.5% perannum, the 6-month U.S. dollar rate is 3.5% per
annum....
Bobcat Company. Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces...
Bobcat Company. Bobcat Company, U.S.-based manufacturer of
industrial equipment, just purchased a Korean company that
produces plastic nuts and bolts for heavy equipment. The purchase
price was Won 8,000 million. Won1,000 million has already been
paid, and the remaining Won 7,000 million is due in six months. The
current spot rate is Won 1,112/$, and the 6-month forward rate is
Won1,173/$. The 6-month Korean won interest rate is 15% per
annum, the 6-month U.S. dollar rate is 3.5% per annum....
Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts...
Bobcat Company, U.S.-based manufacturer of industrial equipment,
just purchased a Korean company that produces plastic nuts and
bolts for heavy equipment. The purchase price was Won7,500 million.
Won1,000 million has already been paid, and the remaining Won6,500
million is due in six months. The current spot rate is Won950/$,
and the 6-month forward rate is Won975/$. The six-month Korean won
interest rate is 8% per annum, the six-month US dollar rate is 6%
per annum. Bobcat can invest at these...
Bobcat Company, U.S.-based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts...
Bobcat Company, U.S.-based manufacturer of industrial equipment,
just purchased a Korean company that produces plastic nuts and
bolts for heavy equipment. The purchase price was Won 8 500
million. Won1,000 million has already been paid, and the remaining
Won7,500 million is due in six months. The current spot rate is
Won1,107/$, and the 6-month forward rate is Won1,178/$. The 6-month
Korean won interest rate is 16?% per annum, the 6-month U.S. dollar
rate is 4.5% per annum. Bobcat can invest...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Why do we design airports for some capacity less than the highest capacity we can ever...
- Write a function log2(x), which gives an integer approximation of the log base 2 of a...
- A 0.025 M solution of hydroxylamine has a pH of 9.11. What is the value of...
- Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs...
- Describe the history of SNMP from its beginning and compare/contrast the features of the different versions....
- Please Show Work An express subway train passes through an underground station. It enters with an...
- I need to find the kth smallest element in the union of 2 sorted arrays in...
ADVERTISEMENT