Assume that Stevens Point Co. has net receivables of 100,000 Singapore dollars in 90 days. The spot rate of the S$ is $.50, and the Singapore interest rate is 2% over 90 days. Suggest how the U.S. firm could implement a money market hedge. Be precise.
Assume that Stevens Point Co. has net receivables of 100,000 Singapore dollars in 90 days. The spot rate of the S$ is $.50, and the Singapore interest rate is 2% over 90 days. Suggest how the U.S. firm could implement a money market hedge. Be precise.
Chapter21: International Cash Management
Section: Chapter Questions
Problem 3ST
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Assume that Stevens Point Co. has net receivables of 100,000 Singapore dollars in 90 days. The spot rate of the S$ is $.50, and the Singapore interest rate is 2% over 90 days. Suggest how the U.S. firm could implement a
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Step 1: Overview
VIEWStep 2: Borrow funds in the domestic currency (USD)
VIEWStep 3: Convert the borrowed funds into the foreign currency (SGD)
VIEWStep 4: Invest the converted funds in the foreign money market
VIEWStep 5: Receive the net receivables in SGD
VIEWStep 6: Convert the received funds back into the domestic currency (USD)
VIEWStep 7: Repay the borrowed funds
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