Pink has just sold equipment to Black. Pink is a US company who has USD accounting. Sale date is March 2020 and payment date is September 2020. Deal amount €2 000 000 Spot March = $1.20/€ 6-month forward contract = $1.14€ Spot September forecast = $1.16/€ Eurozone 6-month borrowing rate = 2.0%/year If Pink hedges 50% of the exposure
Pink has just sold equipment to Black. Pink is a US company who has USD accounting. Sale date is March 2020 and payment date is September 2020. Deal amount €2 000 000 Spot March = $1.20/€ 6-month forward contract = $1.14€ Spot September forecast = $1.16/€ Eurozone 6-month borrowing rate = 2.0%/year If Pink hedges 50% of the exposure
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 51QA
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Pink has just sold equipment to Black. Pink is a US company who has USD accounting. Sale date is March 2020 and payment date is September 2020.
Deal amount €2 000 000
Spot March = $1.20/€
6-month forward contract = $1.14€
Spot September
Eurozone 6-month borrowing rate = 2.0%/year
If Pink hedges 50% of the exposure with forward contracts, then foreign exchange gains/(losses) are _________
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