Question

Assume that Parker Company will receive SF100,000 in 360 days. Assume the following interest rates: U.S. Switzerland 360-day borrowing rate 7% 5% 360-day deposit rate 6% 4% Assume the forward rate of the Swiss franc is $1.0455 and the spot rate of the Swiss franc is $1.0037. If Parker Company uses a Money Market Hedge, it will receive _____in 360 days.

Answer 1

$99,414

Step-by-step explanation:

Calculation to determine how much he will receive If Parker Company uses a Money Market Hedge,

First step is to determine the amount borrowed

Borrowed=(SF100,000/1.05)

Borrowed= SF95,238

Second step is convert SF95,238 to dollar

SF 95,238*$1.0037

=$95,590.38

Now let determine the amount to receive

Amount received=$95,590.38*1.04

Amount received=$99,414

Therefore If Parker Company uses a Money Market Hedge, it will receive $99,414 in 360 days.