P & G India. Proctor and Gambles's affiliate in India, P & G India, procures much...

90.2K

Verified Solution

Question

Finance

P & G India. Proctor and Gambles's affiliate in India, P& G India, procures much of its toiletries product line from aJapanese company. Because of the shortage of working capital inIndia, payment terms by India, payment terms by Indian importersare typically 180 days or longer. P & G India wishes to hedgean 8.5 million Japanese yen payable. Although options are notavailable against the yen. Additionally, a common practice in Indiais for companies like P&G India to work with a currency agentwho will, in this case, lock in the current spot exchange rate inexchange for a 4.85% fee. Using the following exchange rate andinterest rate data, recommend a hedging strategy.

Answer & Explanation Solved by verified expert

4.1 Ratings (801 Votes)

180day account payable Japanese yen 8500000 Spot rate 12060 Spot rate rupeesdollar Rs 4775 Implied calculated spot rate Rs 25257 12060 4775 180day forward rate Rs 24000 Expected spot rate in 180 days Rs 26000 180day Indian rupee investing rate 8000 180day Japanese yen investing rate 1500 See Answer

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!

Become a Member

Transcribed Image Text

P & G India. Proctor and Gambles's affiliate in India, P& G India, procures much of its toiletries product line from aJapanese company. Because of the shortage of working capital inIndia, payment terms by India, payment terms by Indian importersare typically 180 days or longer. P & G India wishes to hedgean 8.5 million Japanese yen payable. Although options are notavailable against the yen. Additionally, a common practice in Indiais for companies like P&G India to work with a currency agentwho will, in this case, lock in the current spot exchange rate inexchange for a 4.85% fee. Using the following exchange rate andinterest rate data, recommend a hedging strategy.