User Account

All Pages

What is the optimal number of euros to be delivered

Assignment Help Accounting Basics
Reference no: EM132892303

Question - A US exporter will receive 30 million Norwegian kroner (NOK) in 3 months and wishes to hedge the US dollar (USD)-NOK exchange rate. Assume that there is no active forward market in NOK. Therefore, the company decides to hedge using a forward contract on a foreign currency whose price changes are highly correlated with those of NOK. It decides to use a forward contract on the euro (EUR).

The standard deviation of quarterly changes in the USD/NOK exchange rate is 0.005. The standard deviation of quarterly changes in the USD/EUR forward rate is 0.025. The correlation between the quarterly changes in the USD/NOK exchange rate and the quarterly changes in the USD/EUR forward rate is 0.858334. What is the optimal number of euros to be delivered in the short forward contract according to the minimum variance hedge ratio?

a. 4.95 million euros

b. 5.00 million euros

c. 5.10 million euros

d. 5.05 million euros

e. 5.15 million euros

Reference no: EM132892303

Questions Cloud

What important consideration regarding his estate planning : Gary was recently widowed and is meeting with Harvey to discuss his estate planning. What important consideration regarding his estate planning
What yearly payment would make the two offers identical : What yearly payment would make the two offers identical in value at a cost of capital of 9%? NPV Simes Innovations, Inc., is negotiating to purchase exclusive.
Determine the payback period for each machine : Do the machines in this problem illustrate any of the weaknesses of using payback? Discuss. Determine the payback period for each machine.
What are total liabilities at the end of the year : Accounts Payable, Census Company had the accounts and balances at the end of the year. What are total liabilities at the end of the year?
What is the optimal number of euros to be delivered : What is the optimal number of euros to be delivered in the short forward contract according to the minimum variance hedge ratio
How can repair credit history : What do you believe your credit report says about you? No credit report because of a lack of credit. What do you want your report to say about you.
Show appropriate journal entries amounts that would apper : Lease is for 7 years. Interest rate is 3.0%. Show the appropriate journal entries amounts that would appear on the Balance Sheet.
Data visualization : There are various languages, some are better for data visualization than others. Please review the basics of Python, SAS, R, and SQL.
Is there any relief available to companies implementing aasb : Is there any relief available to companies implementing AASB 16 due to the COVID-19 pandemic? AASB 16 was released in February 2016 and applies to annual report

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Theory of interest - term structure of interest rates

Term Structure of Interest Rates

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd