Lecture #8
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11. Forward versus Money Market Hedge on Payables. Assume the following information:
90-day U.S. interest rate = 4%
90-day Malaysian interest rate = 3%
90-day forward rate of Malaysian ringgit = $.400
Spot rate of Malaysian ringgit = $.404
Assume that the Santa Barbara Co. in the United States will need 300,000 ringgit in 90
天津英语翻译招聘days. It wishes to hedge this payables position. Would it be better off using a forward
hedge or a money market hedge? Substantiate your answer with estimated costs for each type of hedge.
12.Forward versus Money Market Hedge on Receivables. Assume the following information:
180-day U.S. interest rate = 8%
180-day British interest rate = 9%
180-day forward rate of British pound = $1.50
Spot rate of British pound = $1.48
Assume that Riverside Corp. from the United States will receive 400,000 pounds in 180 days. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge.
32. Comparison of Techniques for Hedging Receivables.
a. Assume that Carbondale Co. expects to receive S$500,000 in one year. The existing
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spot rate of the Singapore dollar is $.60. The one-year forward rate of the Singapore
pamela daviddollar is $.62. Carbondale created a probability distribution for the future spot rate in one year as follows:
Future Spot Rate Probability
$.61 20%
.63 50
.67 30
Assume that one-year put options on Singapore dollars are available, with an exerci
price of $.63 and a premium of $.04 per unit. One-year call options on Singapore dollars are available with an exerci price of $.60 and a premium of $.03 per unit. Assume the following money market rates:
U.S. Singapore
Deposit rate 8% 5%
Borrowing rate 9 6
tax dayGiven this information, determine whether a forward hedge, money market hedge, or a
currency options hedge would be most appropriate. Then compare the most appropriate hedge to an unhedged strategy, and decide whether Carbondale should hedge its
receivables position.
b. Assume that Baton Rouge, In
c. expects to need S$1 million in one year. Using any
relevant information in part (a) of this question, determine whether a forward hedge, aico是什么意思
money market hedge, or a currency options hedge would be most appropriate. Then,
compare the most appropriate hedge to an unhedged strategy, and decide whether
Baton Rouge should hedge its payables position.
33. Comparison of Techniques for Hedging Payables. SMU Corp. has future receivables of
4,000,000 New Zealand dollars (NZ$) in one year. It must decide whether to u options or
a money market hedge to hedge this position. U any of the following information to make
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the decision. Verify your answer by determining the estimate (or probability distribution) of dollar revenue to be received in one year for each type of hedge.
Spot rate of NZ$ = $.54
One-year call option: Exerci price = $.50; premium = $.07
One-year put option: Exerci price = $.52; premium = $.03
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U.S. New Zealand
One-year deposit rate 9% 6%
One-year borrowing rate 11 8
bellRate Probability
Forecasted spot rate of NZ$ $.50 20%greatbarrierreef
.51 50
.53 30
