Wesfarmers (Australian MNC) has imported heavy machinery totaling USD25 million and the payable is due in one year. Wesfarmers and its supplier, BHF (US MNC), have a long-standing business relationship with each other that extends to currency risk sharing on transactions involving both parties. The terms of the currency risk sharing contract are the following: Base rate: AUD0.82/USD Neutral zone: AUDO.743/USD to AUDO.897/USD. The current risk sharing policy between both parties is to equally split the exchange rate risk. If the spot exchange rate in one year is AUDO.955/USD, how much must Wesfarmers pay to BHF? а. AUDO.725m O b. AUD20.138m O c. AUD21.225m d. AUD20.863m е. None of the options in this question are correct.
Wesfarmers (Australian MNC) has imported heavy machinery totaling USD25 million and the payable is due in one year. Wesfarmers and its supplier, BHF (US MNC), have a long-standing business relationship with each other that extends to currency risk sharing on transactions involving both parties. The terms of the currency risk sharing contract are the following: Base rate: AUD0.82/USD Neutral zone: AUDO.743/USD to AUDO.897/USD. The current risk sharing policy between both parties is to equally split the exchange rate risk. If the spot exchange rate in one year is AUDO.955/USD, how much must Wesfarmers pay to BHF? а. AUDO.725m O b. AUD20.138m O c. AUD21.225m d. AUD20.863m е. None of the options in this question are correct.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Wesfarmers (Australian MNC) has imported heavy machinery totaling USD25 million and the payable is due in one year. Wesfarmers and its
supplier, BHF (US MNC), have a long-standing business relationship with each other that extends to currency risk sharing on transactions
involving both parties.
The terms of the currency risk sharing contract are the following:
Base rate: AUDO.82/USD
Neutral zone: AUDO.743/USD to AUD0.897/USD.
The current risk sharing policy between both parties is to equally split the exchange rate risk. If the spot exchange rate in one year is
AUDO.955/USD, how much must Wesfarmers pay to BHF?
a. AUDO.725m
b. AUD20.138m
c. AUD21.225m
d. AUD20.863m
e. None of the options in this question are correct.
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