# In brief, you have made arrangements for the purchase of a commercial

In brief, you have made arrangements for the purchase of a commercial property in Copenhagen

#### How many pages is this assigment?

for DKK 134.00 million. The functional currency of your company is the US dollar. By

seeking a substantial amount of help and guidance from your real estate agent, lots of detailed

arrangements, including signing of the contract, computing the closing costs, funding the

purchase, etc., have already been taken care of. The only remaining item that is the subject of

this inquiry is a lump sum payment of DKK 4,500,000.00 upon the occupancy (delivery) of the

property, which is scheduled for three months from today.

Considering the variations in the currency market these days, you are very concerned that your

expected payment of DKK 4,500,000.00 million may impose unnecessary foreign exchange risk

for your company. You are considering several hedging alternatives to reduce the exchange rate

risk arising from this purchase. The following information is made available to you today:

 The spot exchange rate is DKK 5.66/\$

 The three month forward rate is DKK 5.92/\$

 Forecast of the management for the end of the third month is DKK 5.60/\$

 The company’s cost of capital is 12 percent per year.

 The Danish 3-month borrowing or lending rate is 6 % per annum

 The U.S. 3-month borrowing or lending rate is 3.4 % per annum

 A call or put option for the strike price of DKK 5.85/\$ carries a premium of 1.25 percent

for this period.

Based on the above information, first read further instructions below, then answer the ensuing

FIFTEEN questions (why so many? See above!).

1. If your company chooses to hedge this exposure in the forward market, calculate the outcome

of this hedge in the US dollar.

2. If your company chooses to hedge this exposure in the forward market, the outcome of this

hedge in the US dollar is certain (=1, enter 1 in the template or in the ‘transmittal form’),

risky (=2, enter 2 in the template or in the ‘transmittal form’), certain and risky (=3, enter 3 in

the template or in the ‘transmittal form’).

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.