Manager would hedge this position with a money market hedge

Assignment Help Finance Basics
Reference no: EM132465972

Assume that your company expects to receive a GBP 2,000,000 payment one year from now. The one-year actual forward rate of the USD/GBP is F1USD/GBP = 1.42 and the synthetic one-year forward is FYIUSD/GBP = 1.40. Which of the following statements is true?

Choices

You can hedge this natural short position in GBP by entering a one-year long forward GBP contract. 

Based on a comparison between the actual and synthetic forward rates, a savvy financial manager would hedge this position with an actual forward contract. 

Based on a comparison of the forward rates, a savvy financial manager would hedge this position with a money market hedge. 

You can hedge this natural long position in GBP by entering a one-year long forward GBP contract.

Reference no: EM132465972

Questions Cloud

Company regular sales volume or fixed manufacturing costs : Filling this special order would not affect Central Company's regular sales volume or fixed manufacturing costs.
What is the yield to maturity for bonds : Blue Crab, Inc. has determined that these bonds would sell for $733 each. What is the yield to maturity for these bonds?
What would the annual yield to maturity be on the bond : What would the annual yield to maturity be on the bond if you purchased the bond today?
Applying manufacturing overhead to the mugs : A pre-determined overhead rate is used in applying manufacturing overhead to the mugs
Manager would hedge this position with a money market hedge : Based on a comparison of the forward rates, a savvy financial manager would hedge this position with a money market hedge.
Determine which building would recommend that ayayai inc : In which building would you recommend that The Ayayai Inc. locate, assuming a 11% cost of funds? (Round factor values to 5 decimal places, e.g. 1.25124)
Describe roles that medicare play in funding programs : Describe the roles that Medicare and Medicaid play in funding programs and services. Summarize the changing demographic patterns of the aging population
Speculation with a futures contract : Before any trading, George begins with a margin account balance of $0. On May 1, George believes that silver will appreciate in the next 4 days.
Determine accumulate depreciation-truck : Book it says to add accumulated depreciation and equipment in this case would we add the the accumulated depreciation-trucks and truck under assets?

Reviews

Write a Review

Finance Basics Questions & Answers

  Computation of earnings per share

Pulp Paper Corporation and Holt Paper Corporation are able to generate earnings before interest and taxes of $150,000.

  Compute the price of the beautiful red ferrari

You are considering the purchase of that beautiful red Ferrari 550 Maranello (see below). You are certain you can sell it for $200, 000 two years from now.

  Provide reasoning for your response to discussion questions

Please note that this is an MBA course so you must show and demonstrate your ability to provide reasoning for your response to discussion questions.

  Diversity or wellness program

Workforce Diversity and Wellness- What are your thoughts on your current organizations attempt at a diversity or wellness program?

  Describe three elements that can cause uncertainty

Describe three elements that can cause uncertainty within an enterprise's cash budget and provide your rationale for including each element.

  How much does the firm have in current assets

How much does the firm have in inventory and other assets and how much does the firm have in current assets?

  Comparison of two banks

Select two banks and comparison shop for the best deal on a new personal checking account.

  Compute the weighted average cost of capitol

Assume debt and common equity each represent50% of the firms capitol structure. Compute the weighted average cost of capitol.

  What is the current market value of tracer bond

4. Tracer Manufacturers issued a 10-year bond six years ago. The bond's maturity value is $1,000, and its coupon interest rate is 6 percent. Interest is paid semiannually. The bond matures in four years. If investors require a return equal to 5 pe..

  What effect did firrea have on the prior regulations

The Savings and Loan crisis of the late 1980s is discussed in the book - a bit. The Depository Institutions Deregulation and Monetary Control Act of 1980.

  Describe the terms tombstone ad and red herring disclaimer

Describe the terms tombstone ad and red herring disclaimer.

  Calculate the size of these payments

A $9,200 loan is to be repaid in three equal payments occurring 62, 180, and 300 days, respectively, after the date of the loan.

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