A British company has a USD 1 million payable in two months.How can the British company hedge the foreign currency payable? *       A. Buy pounds in the forward market       B. Sell pounds in the spot market       C. Sell US dollars in the spot market       D. Buy US dollars in the forward market

Consider the situation of firm A and firm B. The current exchange rate is $2.00/£ Firm A is a U.S. MNC and wants to borrow £30 million for 2 years. Firm B is a British MNC and wants to borrow $60 million for 2 years. Their borrowing opportunities are as shown, both firms have AAA credit ratings. $ £ A $ 6 % £ 5 % B $ 7 % £ 4 % Explain how firm B could use the forward exchange markets to redenominate a 2-year £30m 4 percent pound sterling loan into a 2-year USD-denominated loan.

Suppose a U.S. investor wishes to invest in a British firm currently selling for £64 per share. The investor has $12,800 to invest, and the current exchange rate is $2/£.Suppose now the investor also sells forward £6,400 at a forward exchange rate of $1.90/£.   Required:a. Calculate the dollar-denominated returns for each scenario. (Round your percentage answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)

2. Money Market Hedge on Receivables Assume that Parker Company will receive 200,000 Canadian dollars in 360 days. Assume the following interest rates: 360-day borrowing rate 360-day deposit rate U.S. 6% 4% Canada 5% 3% Assume the forward rate of the Canadian dollar is $.80 and the spot rate of the Canadian dollar is $.78. If Parker Company uses a money market hedge, how much U.S. dollars will it receive in 360 days from its Canadian dollar receivable? (round to whole dollars) (2 points)

A UK company owes an American company $100,000 due to be paid in three months. The company wishes to avoid exchange rate risk, so borrows enough in sterling now and converts it immediately to dollars which are invested to bring in the required amount in three months' time. The following information is available: Spot rate $/£ 1.7755 - 1.7765 3-month interest rates: Sterling 3.250% US dollar 2.425% How much will the UK company have to borrow now to clear the debt in three months? A. £54,958 B. £54,989 £56,744 D. £56,775 C.

A U.S. firm, sells merchandise today to a British company for £100,000. The current exchange rate is $1.38/£, the account is payable in three months, and the firm chooses to hedge by borrowing £98,765.43 today and exchanging the proceeds today for dollars; the loan will be paid back with the £100,000 accounts receivable (money market hedge). If Husky converted the borrowed pounds into dollars today and invested that amount at its WACC of 6% (1.5% for 90 days), how much much money in U.S. dollars will Husky Sporting Goods Company have in 90 days?

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A bank in London, Ontario charges 2.50% commission to buy and sell currencies. Assume that the current exchange rate is US$1 = C$1.3599. a. How many Canadian dollars will you receive from the bank if you sell US$1,340? Round to the nearest cent b. How much commission will you pay the bank for this transaction? Round to the nearest cent

A British bank issues a $130 million, three-year Eurodollar CD at a fixed annual rate of 8 percent. The proceeds of the CD are lent to a British company for three years at a fixed rate of 10 percent. The spot exchange rate of pounds for U.S. dollars is £1.50/US$. a-1. Is this expected to be a profitable transaction ex ante? Yes No a-2. What are the cash flows if exchange rates are unchanged over the next three years? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places. (e.g., 32.16)) Eurodollar CD British Loan t Cash Outflow (U.S.$) (£) Cash Inflow (£) Spread (£) 1 million million million million 2 million million million million 3 million million million million b. If the U.S. dollar is expected to appreciate against the pound to £1.65/$1, £1.815/$1, and £2.00/$1 over the next three years, respectively, what will be the cash flows on this transaction? (Negative amount should be indicated by a minus sign. Do not round intermediate…

Which of the following reflects a hedge of net payables in British pounds by a U.S. firm? Group of answer choices a) purchase a currency call option in British pounds. b)  sell pounds forward. c)  borrower in US dollars, convert them to pounds, and invest them in a Britain. A and C