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miskamm [114]
3 years ago
9

Hopkins Corporation has a subsidiary located in Singapore. Next year, the Singapore subsidiary is expected to generate income of

S$2,000,000. Hopkins decides to hedge its translation exposure using a forward contract. The 360-day forward rate for the Singapore dollar is $0.56. If the Singapore dollar ________ by $0.03, Hopkins will have realized a ________ of $________.
Business
1 answer:
Art [367]3 years ago
8 0

Answer:

Hopkins Corporation has a subsidiary located in Singapore. Next year, the Singapore subsidiary is expected to generate income of S$2,000,000. Hopkins decides to hedge its translation exposure using a forward contract. The 360-day forward rate for the Singapore dollar is $0.56. If the Singapore dollar <u>depreciates</u> by $0.03, Hopkins will have realized a <u>gain</u> of <u>$60000.</u>

Explanation:

Since the exposure has been hedged through forward contract, any appreciation is a loss and any depreciation is a gain

Amount = 2,000,000*0.03 = 60,000

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Check the explanation as follows.

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