timber at $ 100 a load and payment will be effected in two equal amounts on the 30th June and on 30th September. The rates of exchange for AD/DEM on the day of your visit are as follows: Buy Sell 30th March 1.4410 1.4108 Forward Margins (Assume a discount) 1 month .0108 .0133 3 months .0320 .0345 6 months .0606 .0634 The financial director tells you of his pleasure at having obtained an AUD contract as opposed to one where the payment would have
Words: 1105 - Pages: 5
Aspen Technology was growing, both domestically and internationally. Along with this growth come important issues to consider. With over 50% of licensing revenues coming from international clients, and many of these clients using the financing that Aspen offered, Aspen needs to have a sound-proof currency hedging strategy in place to manage the risks. Aspen’s current currency hedging strategy is to hedge 100% of its booked sales. This is an unnecessary strategy, primarily because Aspen turns
Words: 476 - Pages: 2
to $ 3.10 in the U.S., and to £ 4.65 in Britain. What should be the one year forward $ / £ exchange rate? (C) Given your answers to parts (a) and (b), and given that the current interest rate in the U.S. is 10%, what would you expect current interest rate to be in Britain? ANSWER 2: (A) According to PPP, the $ / £ rate should be 2.80/3.70, or .76 $ / £. (B) According to PPP, the $ / £ exchange rate one year forward should be 3.10/4.65, or .67 $ / £. (C) Since the dollar is appreciating
Words: 1147 - Pages: 5
cash flows that result from existing contractual obligation) Ex: when a firm buys a forward exchange rate contract it deliberately creates a transaction exposure. 4 option available to manage the exposure 1. Remain unhedged(might gain or lose) 2. Hedge in the forward market(forward contract and a source of funds to fulfil,covered risk) 3. Hedge in the money market(loan contract similar for forward) 4. Hedge in the option market(purchasing a put option) 6 commonly used policies
Words: 483 - Pages: 2
Giddy Forwards, Futures and Money-Market Hedging/1 Forwards, Futures and Money Market Hedging Prof. Ian Giddy New York University Hedging Transactions Exposure Types of exposure l One-shot exposure l Hedging approaches: l u Open u Forward u Money market u Futures u Options l Ongoing transactions exposure Forwards, Futures and Money-Market Hedging 7 Copyright ©1997 Ian H. Giddy Giddy Forwards, Futures and Money-Market Hedging/2 Tools for Hedging l Petrobras has
Words: 1332 - Pages: 6
Global Energy Management Institute International Financial Risk Management R.J. Reynolds International Financing HBS Case 9-287-057 The case is set in the context of RJR’s 1985 financing of its $4.9 billion acquisition of Nabisco Brands Inc. To finance the acquisition, RJR was proposing the issue of $1.2 billion of 12 year notes and the same amount in preferred stock. It had already funded $1.5 billion of the acquisition leaving $1 billion more to finance. Challenges facing RJR: Of the
Words: 1863 - Pages: 8
interest rates are expressed with annual compounding.) For what range of one-year forward prices does the trader have no arbitrage opportunities? Assume there is no bid–offer spread for forward prices. Utilizing the generalized equation Fo = Soe^rT I came up with a range of no arbitrage opportunities. If the Forward price was high, the trader could borrow $950 to buy 1 ounce of gold and then enter into a forward contract to sell the gold in one year. This would result in Fo = $950e(0.06)(1) =
Words: 514 - Pages: 3
from its Newark, New Jersey, manufacturing facility. However, as U.S. manufacturing continued to migrate overseas, Baker would be under intense pressure to find new markets, which would inevitably lead to international sales. Doug Baker was looking forward to this meeting. The recent sale to Novo, while modest in size at 1,210 gallons, had been a significant financial boost to Baker Adhesives. The order had used up some raw-materials inventory that Baker had considered reselling at a loss a few months
Words: 1947 - Pages: 8
possible mechanisms for managing that risk. In particular, sufficient direction and information is provided to examine both a forward hedge and a money-market hedge. The learning objectives of the case are as follows: * To explore the magnitude and effect of exchange-rate risks. * To illustrate exchange-rate risk management through two conventional hedges—a forward-contract hedge and a money-market hedge. * To demonstrate market parity and identify how preferences arise from unique
Words: 912 - Pages: 4
What do you do when someone does you a favor? Instead of paying him back, Trevor Mckinney tells you to pay it forward. Pay It Forward stars Haley Joel Osment (The Sixth Sense) as 7th grader Trevor McKinney, the son of an alcoholic and single mother Arlene (Helen Hunt, What Women Want, Cast Away). Eugene Simonet (Kevin Spacey, American Beauty) is Trevor's unconventional Social Studies teacher who gives his class an unexpected assignment at their first meeting: "Think of an idea to change the world
Words: 861 - Pages: 4
