Under the do nothing alternative-exchange rate

Assignment Help Financial Management

Reference no: EM131043582

1A) Under the “do nothing” alternative, what is the Canadian value of the $60,000 US payable if the exchange rate is

i)) 1/0.6298 US$/Cdn$ (current spot)? ______________

ii) if the spot rate changes to 1/0.6000 US$/Cdn$ ? _____________

iii) to 1/0.6250 US$/Cdn$ ? _________________

iv) to 1/0.6500 US$/Cdn$ ? ______________

v) 1/0.6750 US$/Cdn$ ? ____________________

vi) What would a cost in CAD payoff diagram look like (if Cdn $ were in the vertical axis and the $1 US$/XCdn $ rate were plotted on the X-axis)?

1B) What is the cost in Canadian dollars if you use forward contracts to hedge? What does the payoff diagram look like?

1C) How does alternative 3 differ from alternative 2?

Reference no: EM131043582

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