You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$. Information for Forward Contract: Forward exchange rate (one yr): 1.54 $/BP Information for Money Market Instruments (MMI): Current exchange rate: 1.50 $/BP Investment return at Aerion Fund Management (in UK): 4% annual Interest rate of borrowing from Bank of America (in USA): 2% annual Information you need for Currency Options Contract: Options premium: 0.015 $/BP Interest rate of borrowing from Bank of America (USA): 2% annual Allowed to exercise options at 1.54 $/BP What are the costs of MMI? (Answer in US$ of course. You are US company!) Group of answer choices None of the above $789,343 $735,504 $770,082 $783,452
You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$. Information for Forward Contract: Forward exchange rate (one yr): 1.54 $/BP Information for Money Market Instruments (MMI): Current exchange rate: 1.50 $/BP Investment return at Aerion Fund Management (in UK): 4% annual Interest rate of borrowing from Bank of America (in USA): 2% annual Information you need for Currency Options Contract: Options premium: 0.015 $/BP Interest rate of borrowing from Bank of America (USA): 2% annual Allowed to exercise options at 1.54 $/BP What are the costs of MMI? (Answer in US$ of course. You are US company!) Group of answer choices None of the above $789,343 $735,504 $770,082 $783,452
Chapter22: International Financial Management
Section: Chapter Questions
Problem 8P
Related questions
Question
You are US company, 500,000 BP (British Pound) payable to UK in one year. Answer in terms of US$.
Information for Forward Contract:
Forward exchange rate (one yr): 1.54 $/BP
Information for
Current exchange rate: 1.50 $/BP
Investment return at Aerion Fund Management (in UK): 4% annual
Interest rate of borrowing from Bank of America (in USA): 2% annual
Information you need for Currency Options Contract:
Options premium: 0.015 $/BP
Interest rate of borrowing from Bank of America (USA): 2% annual
Allowed to exercise options at 1.54 $/BP
What are the costs of MMI? (Answer in US$ of course. You are US company!)
Group of answer choices
None of the above
$789,343
$735,504
$770,082
$783,452
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