S 6 month lending rate is 45 per annum or 225 for 6

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International Financial Management
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Chapter 21 / Exercise 7
International Financial Management
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The U.S. 6-month lending rate is 4.5% per annum (or 2.25% for 6 months)The budget rate, or the lowest acceptable sales price for this project, is $1,425,000 or $1.14/13.13.If Plains States chooses not to hedge their euro receivable, the amount they receive in six months will be _____________.(a) $1,125,000(b) $1,137,500(c) $1,115,500(d)undeterminable today
14.If Plains States chooses to hedge its transaction exposure in the forward market, the company will __________ 1,250,000 forward at a rate of ___________.
15.Plains States chooses to hedge its transaction exposure in the forward market at the available forward rate. The payoff in 6 months will be __________.
16.Plains States could hedge the Euro receivables in the money market. Using the information provided, how much would the money market hedge return in six months assuming Plains States reinvests the proceeds at the U.S. investment rate?
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International Financial Management
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Chapter 21 / Exercise 7
International Financial Management
Madura
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