The rates in one month’s time are revealed as follows:Term % Sterling rate1 month 5.05-5.302 months 5.05-5.353 months 5.20-5.254 months 5.25-5.35What is the deposit rate that would have been available for the treasurer in the unhedged situation? Compare this rate with the hedged rate at which the £1m is deposited and comment on the hedge.
The rates in one month’s time are revealed as follows:Term % Sterling rate1 month 5.05-5.302 months 5.05-5.353 months 5.20-5.254 months 5.25-5.35What is the deposit rate that would have been available for the treasurer in the unhedged situation? Compare this rate with the hedged rate at which the £1m is deposited and comment on the hedge.
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 33QA
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Question
The rates in one month’s time are revealed as follows:
Term % Sterling rate
1 month 5.05-5.30
2 months 5.05-5.35
3 months 5.20-5.25
4 months 5.25-5.35
What is the deposit rate that would have been available for the treasurer in the unhedged situation? Compare this rate with the hedged rate at which the £1m is deposited and comment on the hedge.
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