Assume the following information: 180-day U.S. interest rate 8% 180-day British interest rate 9% 180-day forward rate of British pound $1.50 Spot rate of British pound $1.48 Assume that Riverside Corp. from the United States will receive 400,000 pounds in 180 days. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge.
Assume the following information: 180-day U.S. interest rate 8% 180-day British interest rate 9% 180-day forward rate of British pound $1.50 Spot rate of British pound $1.48 Assume that Riverside Corp. from the United States will receive 400,000 pounds in 180 days. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter27: Multinational Financial Management
Section: Chapter Questions
Problem 12P
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Assume the following information:
180-day U.S. interest rate |
8% |
180-day British interest rate |
9% |
180-day forward rate of British pound |
$1.50 |
Spot rate of British pound |
$1.48 |
Assume that Riverside Corp. from the United States will receive 400,000 pounds in 180 days. Would it be better off using a forward hedge or a
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