Kenneth R. Szulczyk
euro exchange rate to fluctuate 1 5%. Identify your net transaction exposure if you sold hotel
packages to a U.S. wholesaler for $1 million in U.S. dollars and bought supplies from
Europe that cost 500,0 00 euros.- Your company will receive 5 million Canadian Dollars (CD) in three months for selling a
shipment of tractors. You are concerned about this transaction exposure and investigate four
methods to protect your company. You have the following data:
Your company uses the spot exchange rate, which equals $0.9 / 1 CD. Your company enters a three-month forward rate that fixes the exchange rate to $1 / 1 CD Company plans to borrow against the accounts receivable in Canada, and the three-month
loan rate in Canada is 5% APR. Company would pay immediately if your company granted a 3% discount rate.- Your company will purchase tomatoes from Mexico for 500,000 pesos in 30 days. You are
concerned about this transaction exposure and investigate four methods to protect your
company. You have the following data:
Your company decides to use the spot exchange rate, which equals $1 / 11 pesos. Your company enters a forward contract that fixes the exchange rate to $1 / 12 pesos. Your company invests in Mexico for thirty days, earning 11% APR interest rate. Your company buys a thirty-day call option for pesos. Strike price equals $1 / 13 pesos
while the premium is 1.5%- Please define the Forex Beta and identify the sources of variation.
- Your company manufactures and sells backpacks across the world. Identify two methods to
reduce economic exposure.