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Pleas advice us why in calculating total receipt in $ not include ( 170.120.50) as this is a receipt from Mjy to companies( 2.3 ) . also why 65 euro not included in total recipet. ( euro )
i got confuse in understanding the answer , please clarify for me more .
The $170, $120, and $50 are payments by the group.
These are netted of against the $ receipts by the group (90 + 50 + 40 + 20 + 30), and it is the net amount that need to be hedged in $’s.The ERU 65 is a payment by the group, and this (together with the other EUR payments) is netted off against the total EUR receipts by the group in order to get the amount of EUR that needs to be hedged.
Dear thank , but why in calculating premium they have select spot rate and in calculating over heading select forward rate of 17.861 why not 1.7835
The premium on options is always payable immediately the option is purchased and so is always converted at the current spot rate.
The over hedge only occurs when the transaction actually occurs (which here is on 31 March) and so the rate on this is fixed by entering into a forward contract.
I do suggest that you watch the free lectures on foreign exchange risk management.
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