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attashe74 [19]
3 years ago
10

Exchange rate is currently $1.25 US per 1 Euro. Interest rate is 2% in the US and 1% in Eurozone. A bank is long a futures contr

act on 1,000,000 Euro with F= $1.20 per unit, maturing in one year. What position should the bank take to hedge the currency risk?
a. Borrow $1,237,624 US
b. Invest $990,099 U.S.
c. Invest $1,237,624 US
d. Borrow $990,099 US
Business
1 answer:
kolbaska11 [484]3 years ago
8 0

Answer:

Invest $990,099 U.S

Explanation:

The interest rate is 2% for US dollars and 1% for euro

The exchange rate is 1.25 dollars to a euro.

To calculate future exchange rate:

1.25dollars (1+exchange rate of us/1+ exchange rate of euro)

= 1.25(1.02/1.01)

= 1.2625

Approximately 1.26

After a year they will be getting .26 million dollars.

They need to invest something close to this amount 1.2/1.02

Therefore option b is the best answer

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Answer:

See explaination and attachment

Explanation:

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See attachment for the step by step solution of the given problem.

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3 years ago
Proposal preparation is completed by Select one: a. a large team for a simple project. b. a single person when proposing a multi
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Answer:

d. one or more people depending upon the requirements of the proposal.

Explanation:

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Proposal preparation is completed by one or more people depending upon the requirements of the proposal.

In order to prepare a good proposal, it is very important to make it as formal as possible. The content of the proposal is strictly based on what the initiators wants to do or achieve, as well as how they wish to achieve.

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3 years ago
When Whitney took over her father's sporting goods store, she evaluated some of her father's vendor relationships. She found tha
muminat

Answer:

<em>Open Communication</em>

Explanation:

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6 0
3 years ago
List the five factors that affect the labor market.
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The five major factors are immigration, discrimination, unions, unemployment, and income
7 0
2 years ago
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Cost and Amortization of Intangible Assets On January 2, 2019, Frazier Company purchased a restaurant franchise for $85,000. The
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Answer: The following journal entries would apply:

<u>Purchase of franchise:</u>

Debit: Restaurant franchise (intangible asset) $85,000

Credit: Cash $85,000

<u>Amortization of franchise:</u>

Debit: Amortization charge $708

Credit: Accumulated amortization $708

Explanation: When the franchise was purchased, there was a cash outflow. So the above first entries would apply in order to recognize the intangible asset in Frazier Company's books. However, the intangible was meant to be amortized over 10 years, meaning $85,000/10 years = $8,500 annual amortization charge. We still have to divide this by 12 in order to arrive at the monthly amortization charge. So $8,500 divided by 12 months = $708 monthly. The above entries apply on amortization.

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