Using forward hedge or money market hedge

Assignment Help Financial Management

Reference no: EM131566029

With the following information:

• 90 day U.S. interest rate = 1.5%

• 90-day Philippine interest rate = 3%

• 90-day forward rate of Philippine peso = $0.020

• Spot rate of Philippine peso = $0.025

Assume your firm in the United States will need 300,000,000 Philippine pesos in 90 days. It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Provide the mathematical analysis to justify your position.

Reference no: EM131566029

Questions Cloud

An issue of common stock most recent dividend : An issue of common stock's most recent dividend is $3.35. Its growth rate is 4.0%. What is its price if the market's rate of return is 7.2%?

What is required rate of return : The year end dividend is expected to be $3.35 assuming a constant growth rate of 8%. What is the required rate of return?

Creating college investment fund : Mr. Blochirt is creating college investment fund for his daughter. He will put in $8,000 per year for next 18 years and expects to earn 6% annual rate of return

What is future value : The interest rate is 11 percent. What is the future value?

Using forward hedge or money market hedge : It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market hedge?

How much return will his investment earn during time period : How much return will his investment earn during this time period?

You will expect to receive if you use currency put option : Determine the amount of dollars that you will expect to receive if you use a currency put option hedge.

What is its net credit position : What is its net credit position? Note that a negative position implies receivables exceed payables.

What is effective rate of interest : what is the effective rate of interest on a $880,000 loan where a 13% compensating balance is required?

User Account

All Pages