Your Firm Is a U

question 89

Multiple Choice

Your firm is a U.K.-based exporter of bicycles.You have sold an order to a Swiss firm for SFr.1,000,000 worth of bicycles.Payment from the Swiss firm (in Swiss francs) is due in 12 months.Use a money market hedge to redenominate this one-year receivable into a euro-denominated receivable with a one-year maturity.

• A)£500,000
• B)£464,874.41
• C)£446,730.77
• D)£509,900.99

Contract Size	Country	U.S. $ equiv.	Currency per U.S. $	interest rates	APR
£ 10,000	Britain (pound)	1.9600	£ 0.5102
	12 months forward	2.0000	£ 0.5000
€ 10,000	Euro	1.5600	€ 0.6410	i$ =	1%
	12 months forward	1.6000	€ 0.6250	i€ =	2%
SFr. 10,000	Swiss franc	0.9200	SFr. 1.0870	i£ =	3%
	12 months forward	1.0000	SFr. 1.0000	iSFr. = 4	4%

The following were computed without rounding.Select the answer closest to yours.

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