Receivable using the forward market hedge

Assignment Help Financial Management

Reference no: EM132057352

Alcoa Chemical, a US company, has sold £2 million chemicals to CPL Co. Payment is due in 180 days.

Spot rate: $1.62/£

180-day forward rate $1.56/£

180-day U.S. dollar interest rate (annualized) 3%

180-day Pound interest rate (annualized) 4%

180-day call option on pound at $1.59/£ premium $0.04 per pound

180-day put option on pound at $1.59/£ premium $0.05 per pound

(a) What is the hedged value of Alcoa's receivable using the forward market hedge?

(b) What is the hedged value of Alcoa's receivable using the money market hedge?

(d) What alternative is available to Alcoa to use currency options to hedge its receivable? What is the hedged value of Alcoa's receivable using the option hedge?

(e) What are the advantages and disadvantages of the option, forward and money market hedges on managing transaction exposure?

Reference no: EM132057352

Questions Cloud

What swap transaction would accomplish this objective : Determine the future spot price at which the speculator will only break even. What swap transaction would accomplish this objective?

Find the net present value of this project : Mill Company is evaluating the proposed acquisition of a new milling machine. Find the net present value of this project (NPV).

What is the current value of new start share today : If the required return is 15%, what is the current value of a New Start share today?

What is the net asset value for this mutual fund : What is the net asset value (NAV) for this mutual fund?

Receivable using the forward market hedge : What is the hedged value of Alcoa's receivable using the forward market hedge?

Calculate the front-end load : The World Income Appreciation Fund has current assets with a market value of $9.6 billion, Calculate the front-end load.

Chance to buy put or call option from currency : You are offered a chance to buy put or call option from currency dealer with strike price of USD 0.8300/CHF with June expiration and premium of USD 0.0050//CHF

Firm optimal capital structure : A firm’s optimal capital structure ______ is generally. If a stock has beta 1.5, how to interpret it?

What was your return for the year : If the NAV of the fund at the end of the year was $75.39, what was your return for the year?

User Account

All Pages