(Transaction Exposure) Trident-AU.S.-based company, has concluded a sale of telecommunications equipment to Regency (U.K

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Transaction Exposure Trident Au S Based Company Has Concluded A Sale Of Telecommunications Equipment To Regency U K 1 (67.65 KiB) Viewed 9 times

(Transaction Exposure) Trident-AU.S.-based company, has concluded a sale of telecommunications equipment to Regency (U.K.). A total payment of £2,000,000 is due in 90 days. The following table shows relevant exchange rates and interest rates. To hedge, the company is considering using £2,000,000 put options with the Xin 90 days. (Keep two strike of $1.55/£. The minimum net receipt (accounting for the cost) from such options hedge is $ decimal numbers/) Assumptions 90-day A/R in pounds Spot rate, USS per pound (S/£) 90-day forward rate, US$ per pound ($/£) 3-month U.S. dollar investment rate 3-month U.S. dollar borrowing rate 3-month UK investment interest rate 3-month UK borrowing interest rate Put options on the British pound: Strike rates, US$/pound ($/£) Strike rate ($/£) Put option premium Strike rate (S/£) Put option premium Strike rate ($/£) Call option premium Trident's WACC Expected spot rate in 90 days, US$ per pound (S/£) Value £2,000,000.00 $1.5610 $1.5614 3% 7% 8% 11% $1.55 7.7% $1.54 6.3% $1.55 2.6% 12.000% $1.5431