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soldi70 [24.7K]
3 years ago
11

Corona Co. is expecting to receive 100,000 British pounds in one year. Corona expects the spot rate of British pound to be $1.49

in a year, so it decides to avoid exchange rate risk by hedging its receivables. The spot rate of the pound is quoted at $1.51. The strike price of put and call options are $1.54 and $1.53 respectively. The premium on both options is $.03. The one-year forward rate exhibits a 2.65% premium. Assume there are no transaction costs. What is the best possible hedging strategy and how many U.S. dollars Corona Co. will receive under this strategy
Business
1 answer:
Grace [21]3 years ago
7 0

Answer:

Explanation:

1st strategy : Selling pound forward

The spot rate of the pound is quoted at $1.51.

The one-year forward rate exhibits a 2.65% premium.

The one-year forward rate = 1.51 ( 1+ 0.0265)

= $ 1.55

Dollars received = 100000 * 1.55 = $155000

2nd strategy : Buying put option

The strike price of put = $1.54

premium on option is $.03

Amount received per option = $ 1.54 - $ 0.03 =$1.51

Total Dollars received = 100000* 1.51 = $ 151000

the best possible hedging strategy is Selling pound forward and receiving $155000

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Answer:

recruitment is the correct answer.

Explanation:

  • Recruitment is a process of hiring and selecting the right and qualified person for a vacant position.
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Ruby wants to start her own business taking photographs. She already has her own camera, but needs to purchase lights, a photo p
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$432.97

Explanation:

Total cost = cost of printer + cost of light + cost of photo paper

$251.99 + $150 + $30.98 = $432.97

6 0
3 years ago
The required rate of return on a certain bond changes from 12 percent to 8 percent, causing the price of the bond to change from
Olenka [21]

Answer:

the bond's price elasticity = - 0.67

Explanation:

present bond value = $1100

previous bond value = $900

change in bond value = $1100 - $900 = $200

present bond percentage = 8%

previous bond percentage = 12%

% change in bond value = 8% - 12% = - 4%

Bond price elasticity = \frac{change  in bond value}{previous bond value}/\frac{change in percentage}{previous percentage}

                                  = \frac{200}{900} / \frac{-4}{12}

                                  = \frac{2}{9} * -3

                                  = - 0.67

5 0
3 years ago
Draw a correctly labeled loanable funds graph that shows what happens to real interest rates for each of the following situation
Arlecino [84]

Answer:

1. a) War increases demand for loanable funds, demand curve shifts RIGHT. (Increase in real interest rate)

b) Private investors are optimistic about the economy (i.e. investment opportunities). Demand for loanable funds increases, demand curve shifts RIGHT. (Increase in real interest rate)

c) Tax increase means a decrease in the supply about loanable funds. Supply curve shifts LEFT. (Increase in real interest rate)

2. would most likely increase the supply of loanable funds. If Americans are saving more, then they are spending less money and investing more of it. Remember--saving does not mean "not using it". It means investing it instead of consuming.

3. The interest rate will fall. There is a surplus of loanable funds and the real interest rate will reflect this surplus by falling.

4. decrease in the demand for loanable funds. When output decreases, the return on investment for new projects decreases and investors are less in need of money to fund their ventures.

5. decrease the supply for loanable funds. If they are consuming more, they are saving less.

6. Increase / Decrease. When interest rates increase, growth is reduced because funding economic ventures is now more costly. Sometimes the fed will increase interest rates when it anticipates inflation to increase in order to mitigate economic growth.

Hope this was helpful!

Explanation:

5 0
3 years ago
Carrie wants to go on her family reunion in four years. The cost of the cruise they are planning to take is $5,000. She has foun
Slav-nsk [51]

Answer:

She Should Invest $3,815 now.

Explanation:

Future value is the accumulated value of principal and compounded interest earned in specific period on an specific return rate applied to present value. It is calculated by following formula:

FV  = PV x ( 1 + r )^n

FV = Future Value = $5000

PV  = Present Value = ?

r = return rate = 7%

n = number of years = 4 years

$5000 = PV  ( 1 + 7% )^4

$5000 = PV  ( 1 + 0.07 )^4

$5000 = PV  ( 1.07 )^4

$5000 = PV  x 1.311

PV  = $5,000 / 1.311

PV  = $3,815

5 0
3 years ago
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