Answer Happy

Posted: **Tue Jan 18, 2022 12:59 pm**

: Cray Research Sold A Supercomputer To The Max Planck Institute In Germany On Credit And Invoiced 11 60 Million Payable 1 (19.56 KiB) Viewed 183 times

: Cray Research Sold A Supercomputer To The Max Planck Institute In Germany On Credit And Invoiced 11 60 Million Payable 2 (12.97 KiB) Viewed 183 times

Cray Research sold a supercomputer to the Max Planck Institute in Germany on credit and invoiced €11.60 million payable in six months. Currently, the six-month forward exchange rate is $118/€ and the foreign exchange adviser for Cray Research predicts that the spot rate is likely to be $1.13/€ in six months. a. What is the expected gain/loss from a forward hedge? b. If you were the financial manager of Cray Research, would you recommend hedging this euro receivable? Yes No

c. Suppose the foreign exchange adviser predicts that the future spot rate will be the same as the forward exchange rate quoted today. Would you recommend hedging in this case? Yes No d. Suppose now that the future spot exchange rate is forecast to be $1.25/6. Would you recommend hedging? Yes No