Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. unilevers affiliate in mumbai, unilever india, pro

Unilevers affiliate in Mumbai, Unilever India, procures much of its toiletries product line from a...

90.2K

Verified Solution

Question

Finance

Unilevers affiliate in Mumbai, Unilever India, procures much of its toiletries product line from a Tokyo-based company. Because of the shortage of working capital in India, payment terms by Indian importers are typically 180 days or longer. Unilever India wishes to hedge an 8.5 million Japanese yen payable. Although options are not available on the Indian rupee (Rs), forward rates are available against the yen. Additionally, a common practice in India is for companies like Unilever India to work with a currency agent who will, in this case, lock in the current spot exchange rate in exchange for a 4.85% fee. Using the following exchange rate and interest rate data, recommend a hedging strategy.

180-day account payable, Japanese yen ()

8,500,000

Spot rate (/$)

120.60

Spot rate, rupees/dollar (Rs/$)

47.75

180-day forward rate (/Rs)

2.4000

Expected spot rate in 180 days (/Rs)

2.6000

180-day Indian rupee investing rate

8.000%

180-day Japanese yen investing rate

1.500%

Currency agent's exchange rate fee

4.850%

Unilever India's cost of capital

12.00%

Answer & Explanation Solved by verified expert
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

Other questions asked by students