Acme Corporation, located in the United States, purchased inventory from a Swiss firm and payment...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Acme Corporation, located in the United States, purchased inventory from a Swiss firm and payment of SF400 million is due in one year. The current spot rate is SF.96/USD and the one-year forward rate is SF.93/USD. The annual interest rate is 1.5 percent in Switzerland and 2 percent in the United States. Acme can also buy a one-year option on Swiss francs at the strike price of $1.08/SF for a premium of $0.002 per Swiss franc.
Assume that the forward rate is the best predictor of the future spot rate. What is the expected dollar cost at the time of paymentif Acme decides to hedge using an option contract? Show your calculations. (4 points)
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.