are the treasurer for ABC corporation.  You just received a bill from your Italian supplier of Genoa salami for Eur1,000,000. The Euros are due in three months. 1- What is your underlying exposure? ( Are you long or short Euros before you think about hedging? You owe Euros) 2- If the EURUSD 3 month forward exchange rate is $1.15/EUR today. Tomorrow the EURUSD 3 month forward rate rises to $1.18/EUR When you mark your books to market, what is the gain or loss on t

A company is due to receive €2,500,000 two-months from today and wishes to save the funds for three months. Money market interest rate spreads for short-term euro transactions are presented in the table below.     Money Market Euro Interest Rate Spreads (%) 1 month 2 months 3 months 4 months 5 months 6 months 0.20 - 0.25 0.28– 0.33 0.35 – 0.40 0.45 – 0.56 0.60 – 0.67 0.75 – 0.83 A bank is willing to offer the company a forward rate agreement (FRA), incorporating a forward rate fixed at the level calculated in part a). When the money is received, the €LIBOR rate is 0.35%. Calculate and explain the terms on which the FRA is settled.

A UK company owes an American company $100,000 due to be paid in three months. The company wishes to avoid exchange rate risk, so borrows enough in sterling now and converts it immediately to dollars which are invested to bring in the required amount in three months' time. The following information is available: Spot rate $/£ 1.7755 - 1.7765 3-month interest rates: Sterling 3.250% US dollar 2.425% How much will the UK company have to borrow now to clear the debt in three months? A. £54,958 B. £54,989 £56,744 D. £56,775 C.

2. The interest rate in European bank is 5% now, and the exchange rate is currently 1.05 dollars per euro. If you expect that the exchange rate will be 0.95 dollars per euro one year from now, what is the expected interest rate in the American bank?

The treasurer of a major U.S. firm has $38 million to invest for three months. The interest rate in the United States is .55 percent per month. The interest rate in Great Britain is .59 percent per month. The spot exchange rate is £.76, and the three-month forward rate is £77. Ignore transaction costs. a. If the treasurer invested the company's funds in the U.S., how much would the investment be worth after three months? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. b. If the treasurer invested the company's funds in Great Britain, how much would the investment be worth after three months in U.S. dollars? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89. a. U.S. investment b. Great Britain investment

An investor starts with €1 million and converts them to £694,500 which is then invested for one year. In a year the investor has £736,170 which she then converts back to euros at an exchange rate of 0.68 pounds per euro. The annual euro rate of return earned was .0775 .06 .0826 .0813

After finishing your degree, you decide to go on a post-graduation celebration trip to the UK. You leave with 8,000€ in your pocket. You want to exchange all these € for the U.K. pounds (GBP).  Have a look at the WSJ table attached here and identify the following quotes: Spot rate on the EUR:                                      Spot rate on the U.K. pound (GBP):              What is the GBP/EUR cross rate? How many U.K. pounds (GBP) will you get for your Euros?

You have $ 10 million to invest. If you invest the money in the US for six months, you can earn 2%/year. Alternatively, you can invest in Switzerland and earn 4%/year. The spot exchange rate is CHF 0.9188/$. The forward exchange rate for delivery six months hence is CHF 0.9188/$. Which method of investing do you prefer and what will be the value of your investment at maturity? Assume no transaction cost. O Invest in the US; $10,373,610 Invest in Switzerland; $10,202,013 O None of these O Invest in Switzerland; CHF 10,373,610 O Invest in the US; $10,100,502

You open a 90-days Eurodollar time deposit three months from now. You enter into a 3x6 forward rate agreement (FRA). The amount you will deposit is $13,884,503. The six-month Libor rate is 3 The three-month Libor rate is 1 What is your forward rate?

Subject:- finance