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Hello, thank you for great lections!
I have a question in regards of the question 14 Little Plc, part (b), page 170.
The net cash payment for 6 months is $447 – $154 = $293, that is clear.
According to this calculation the net cash receipt for 3 months should be $197 – $116 = $81.
Why do we take the net payment for 3 months as $197? Why payment, not receipt? Why $116 are not hedged?With best regards!
I am sorry – there is an error in the answer.
It is a net receipt of $81,000 and the answer should read:
The net receipt in three months is ($116,000 – $197,000)/1.7063 = £47.471
Sorry about that 🙁
John,
I am getting the following answers using money market for the same question as above on the three months forward.
Borrow: 79218 USD
Convert: 46218 pounds
Invest: 47316 pounds
Could it be the same mistake as above? i.e. the mistake on netting off of the receipt and the payment?Thanks
Oh dear 🙁
Yes – it is the same mistake (and typing errors as well!).
I will correct the whole page today.
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