1 a singaporean company is exporting orchids to japan the, Ask an Expert

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1. A Singaporean company is exporting orchids to Japan. The company has a receivable of JPY5,000,000 due in three months’ time. The company approaches its bank and enters into a forward exchange contract. Rates are quoted as SGD/JPY84.45-50, forward points 9-6. Explain and show how the transactions will take place today and in three months’ time. Show your calculations.

2. Explain how an Australian company could hedge its net USD payables using a borrow, spot and invest money-market hedging strategy. Illustrate your answer based on the company having a USD1 million payable due in 180 days. Assume a spot rate of AUD/USD0.9224-30, a US interest rate of 2.30 per cent per annum and an Australian interest rate of 5.40 per cent per annum.

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Financial Management, Finance

Category:- Financial Management
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