Which one of the alternatives you will recommend

Assignment Help Finance Basics

Reference no: EM131922944

Question: ABC Corporation has 90-day receivables of Euro 500,000. The following information is available:

Spot rate of the Euro: $ 1.20 per Euro

90-day Forward Rate: $ $1.15 per Euro 90-day

Interest rates are as follows: US Euro

90-day deposit rate 5.0 % 5.0 %

90-day borrowing rate 7.0 % 7.0 %

A call option on Euro that expires in 90-days has an exercise price of $1.20 and has a premium of $ 0.03. A put option on Euro that expires in 90-days has an exercise price of $1.20 and has a premium of $0.02

The Euro spot rate in 90-days is forecasted to be:

Possible Rate Probability

$1.15 30 %

$1.10 70 %

ABC Corporation is considering:

a) A forward hedge

b) A money market hedge

c) An option hedge and

d) Remaining un-hedged

You have been hired as a consultant to decide on the best possible hedge. Which one of the alternatives you will recommend, and why?

Reference no: EM131922944

Questions Cloud

What personal tax rate will make the stockholders : Suppose the only investment choice is a preferred stock that yields 8 percent. The corporate dividend exclusion of 70 percent applies.

What goals motivate an alcohol tax : Both a payroll tax and an excise tax on alcohol raise revenue and, respectively, shrink the markets for labor and alcohol. What goals motivate an alcohol tax?

What project manager recommend to take initiatives : Why have not other entrepreneurs undertaken the entrepreneurial initiatives what project manager recommend?

Complete reaction of magnesium : How many moles of hydrogen gas would be produced by the complete reaction of this magnesium?

Which one of the alternatives you will recommend : You have been hired as a consultant to decide on the best possible hedge. Which one of the alternatives you will recommend, and why?

How would you resolve the situation : During sign off of a project, you are informed of an overbilling concern with several contracted project team members.

What irr would you earn based on holding period : You are deciding whether to own or rent a single family residence. You could rent the property for $2,000 a month, or you could buy the property for $200,000.

List three alternatives that the group may come up with : Outline the group of people you would assemble for brainstorming, and how you would use the Delphi method to solve this transportation problem.

Water and hydrochloric acid : This was a magnesium reacting with HCL experiment. Mg wrapped in copper lowered into tube with water and Hydrochloric acid.

User Account

All Pages