Tuli Super Minerals of Manicaland exports raw diamonds valued at one million pounds (£1,000,000) on 180 days credit on simple interest to the European Union (EU). The prevailing interest rates gazetted from UK banks and Zimbabwean (ZW) banks are as follows: Deposit rateLending rateUK8%10%ZW20%50% In addition, assume that the prevailing spot exchange rate is ZW/UK Pounds is 135.00-145.00 And the number of days in a year is 360 days.Calculate the amount that would be receivable by Tuli Super Minerals if the money market hedge is applied.

The money market hedge is used by companies to hedge a transaction with a foreign company. It…

Answered: Tuli Super Minerals of Manicaland…

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 1ST

See similar textbooks

Related questions

Question

Tuli Super Minerals of Manicaland exports raw diamonds valued at one million pounds (£1,000,000) on 180 days credit on simple interest to the European Union (EU). The prevailing interest rates gazetted from UK banks and Zimbabwean (ZW) banks are as follows:

	Deposit rate	Lending rate
UK	8%	10%
ZW	20%	50%

In addition, assume that the prevailing spot exchange rate is ZW/UK Pounds is 135.00-145.00

And the number of days in a year is 360 days.

Calculate the amount that would be receivable by Tuli Super Minerals if the money market hedge is applied.

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

Expert Solution