Money market hedge of payables hawkes imports a us firm, Financial Management

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Money market hedge of payables hawkes imports a us firm

Money Market Hedge of Payables. Hawkes Imports, a U.S firm, imports sauvignon blanc wines from New Zealand. It has payables of New Zealand dollars (NZD) 1,000,000 in six month. The treasurer of Hwakes is considering a money market hedge and is faced with the following data:

NZD spot USD 0.62

NZD 6- month forward USD 0.60

USD rate, lending 4%

USD rate, borrowing 4.3%

NZD rate, lending 5%

NZD rate, borrowing 6.2 %

Show the steps involved in this hedge and net cash flow ( cost) of meeting the payables. Assume annual compounding.

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Financial Management: Money market hedge of payables hawkes imports a us firm

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Financial Management: Money market hedge of payables hawkes imports a us firm

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