ABC Co. entered a forward contract to hedge a ¥100,000,000 which the company expects to pay in 90 days. The contract calls for ABC Co. to deliver yen (¥) at ¥111.25 per U.S. dollar. If on the delivery date, the spot rate is ¥109.75 per U.S. dollar. How much is the gain (loss) on the hedge? $12,285.33 ($12,285.33) $66,666.67 ($66,666.67)

ABC Co. entered a forward contract to hedge a ¥100,000,000 which the company expects to pay in 90 days. The contract calls for ABC Co. to deliver yen (¥) at ¥111.25 per U.S. dollar. If on the delivery date, the spot rate is ¥109.75 per U.S. dollar. How much is the gain (loss) on the hedge? $12,285.33 ($12,285.33) $66,666.67 ($66,666.67)

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 1ST

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ABC Co. entered a forward contract to hedge a ¥100,000,000 which the company expects to pay in 90 days. The contract calls for ABC Co. to deliver yen (¥) at ¥111.25 per U.S. dollar. If on the delivery date, the spot rate is ¥109.75 per U.S. dollar. How much is the gain (loss) on the hedge?
Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months. What is the expected value of payables in AUD under hedge?
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