21 Jun Tek, a US firm has an account payable
Tek, a US firm has an account payable (AP) resulting from its purchase of electronic equipment from a German firm. The amount of the receivable is €500,000 and it is due in six months. Teck wants to hedge the AP against currency risk. Citibank has offered Teck the following quotes:
Spot rate $1.1520/€
3-month forward rate $1.1620/€
Euro interest rate 2.4%
Premium on 6-month put option on euros at
a strike price of $1.1650 $0.01
Premium on 6-month call option on euros at
a strike price of $1.1650 $0.015
U.S. interest rate 3.6%
Teck’s 6-month forecast for euro $1.1500/€
a. Calculate the locked-in value of this AP if Teck chooses (1) forward market hedge, (2) money market hedge, (3) options market hedge, and (4) remains unhedged.
b. What are the risks (uncertainty) of each alternative?
c. Which alternative should Tek choose if it prefers to “play it safe”?
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.