Medex a florida corporation has an account receivable ar, Ask an Expert

Finance

Medex, a Florida corporation, has an account receivable (A/R) from a Canadian customer for C$ 5 million due in 6 months. Given the following information:

Spot rate: C$ 1.000 / US$

6 month Forward rate: C$ 1.080 / US$

6 months Canadian interest rate: 3.70 %

6 months U.S. interest rate: 1.50 %

Six month C$ call at strike price of C$1.00 / US$ is $0.040 per C$.

Six month C$ put at strike price of C$1.00 / US$ is $0.030 per C$.

Amount of account receivable: C$ 5,000,000

How would you hedge the account receivable (A/R) using the Forward Market, Money Market and the Options market? Calculate the U.S. dollar equivalent of the hedged amount of the account receivable, for each method write out the steps and amounts involved so yo can receive full credit. If Medex hedges the FX risk, what other risk does it still face with respect to the A/R?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91253949

Have any Question?Write your Review or question?

Related Questions in Basic Finance

How can businesses use technology and relationships to

How can businesses use technology and relationships to reduce their environmental impact?

Explain how the company newmans own brand fulfills the

Explain how the company Newman's Own brand fulfills the definition of a business for profit and a non-profit business at the same time. Consider in the response the functions of business, entrepreneurship and production ...

Time value of money problem - future valuean amount of 160

TIME VALUE OF MONEY Problem - Future Value An amount of $160, 000 was invested on Jan 1, 2011 by a relative of your colleague for 2 years at the annual rate of 9.4% compounded quarterly. But in Jan 1, 2012 the terms of t ...

What are the benefits of franchise to both the franchisee

What are the benefits of franchise to both the franchisee and franchiser and What factors would you consider if interested in buying a franchise?

Asset management ratios corn products corp ended the year

Asset Management Ratios Corn Products, Corp. ended the year 2008 with an average collection period of 32 days. The firm's credit sales for 2008 were $10.7 million. What is the year-end 2008 balance in accounts receivable ...

You are considering an investment in a 40-year security the

You are considering an investment in a 40-year security. The security will pay $25 a year at the end of each of the first three years. The security will then pay $30 a year at the end of each of the next 20 years. The no ...

How to find the amount of us dollars needed to purchase 1

How to find the amount of US dollars needed to purchase 1 swiss franc if the exchange rate is 0.9897 Swiss francs per U.S. dollar A trip to Japan is estimated to cost$606. How many yen do you need to buy if the exchange ...

Piping hot food services is evaluating a project that costs

Piping Hot Food Services is evaluating a project that costs $75,000. The project is expected to generate after-tax cash flows equal to $26,000 per year for four years. Their required rate of return is 14%. What is the ne ...

Are us executives paid too much particularly compared to

Are U.S. Executives paid too much particularly compared to the average worker in their organization?

A risky fund has an expected return of 10 and standard

A risky fund has an expected return of 10% and standard deviation of 15%. The T-Bill rate is 5%. An investor allocates 60% of her retirement portfolio to the risky fund and 40% to T-Bills. What is the investor's risk ave ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert