a) Subsidiary A of a U.S. Corporation has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000. The expected exchange rate of the Australian dollar is $.55. What is the net inflow or outflow, as measured in U.S. dollars? b) If you are a U.S. importer of Indian goods and you believe that today’s forward rate of the INR is a very accurate estimate of the future spot rate, do you think INR call options would be a more appropriate hedge than a forward hedge? c) Under what conditions would a U.S. parent’s subsidiary consider using a “leading” strategy and a “lagging” strategy to reduce its transaction exposure? Explain

Since you have posted multiple independent questions, according to our guidelines, only the first…

a) Subsidiary A of a U.S. Corporation has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000. The expected exchange rate of the Australian dollar is $.55. What is the net inflow or outflow, as measured in U.S. dollars?

a) Subsidiary A of a U.S. Corporation has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000. The expected exchange rate of the Australian dollar is $.55. What is the net inflow or outflow, as measured in U.S. dollars?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter6: Managing In The Global Economy

Section: Chapter Questions

Problem 12E

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Question

a) Subsidiary A of a U.S. Corporation has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000. The expected exchange rate of the Australian dollar is $.55. What is the net inflow or outflow, as measured in U.S. dollars?

b) If you are a U.S. importer of Indian goods and you believe that today’s forward rate of the INR is a very accurate estimate of the future spot rate, do you think INR call options would be a more appropriate hedge than a forward hedge?

c) Under what conditions would a U.S. parent’s subsidiary consider using a “leading” strategy and a “lagging” strategy to reduce its transaction exposure? Explain

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