1)Samson Inc. needs €1,000,000 in 30 days. Samson can earn 5 percent annualized

Question

1)Samson Inc. needs €1,000,000 in 30 days. Samson can earn 5 percent annualized on a German security. The current spot rate for the euro is $1.00. Samson can borrow funds in the U.S. at an annualized interest rate of 6 percent. If Samson uses a money market hedge, how much should it borrow in the U.S.?
a. $952,381.
b. $995,851.
c. $943,396.
d. $995,025.

2). To hedge a ____ in a foreign currency, a firm may ____ a currency futures contract for that currency.
a. receivable; purchase
b. payable; sell
c. payable; purchase
d. none of the above

Explanation / Answer

Samson can earn 5% annualized return on a German Security

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