[Solved] Assignment 219467


Assignment Details

Subject: Business    / Finance
QuestionHighspeed Electronics Limited has taken delivery of 50,000 electronic devices from an American company. The seller is in a strong bargaining position and has priced the devices in American dollars at $12.00 each.Highspeed Electronics Limited has been granted three months credit. Assume that interest rates in America are 3% per quarter (three months). Highspeed electronics Limited has all its money tied up in its operations but it could borrow in dollars at 3% per quarter if necessary.Foreign exchange ratesUS$ = Sh. 1Spot 0.013Three month forward 0.0154A three month dollar call option for US$ 600,000 is available at a premium of US$15,000.Required:(i) Using suitable computations, illustrate two hedging strategies available to Highspeed Electronics Limited. (8 marks)(ii) Distinguish between a.igmhb.com/click?v=SU46MTE1MjE0OjI0NTU6Y3VycmVuY3kgb3B0aW9uczplZDZmYjVmYzJiZTVlMjliYWMwMDcwYjAxMTBlZGFiNjp6LTI1MjctODg2MDg4NTk6d3d3LmNvdXJzZWhlcm8uY29tOjM2MjQ2Njo3OTA4YTE4YzcwNDZhMTBkMmVkMzM2N2NmMzhmNzc5ZjozNmEyMGU0MjFkNmM0M2YwOTEyMTdkOWVjZWM3YjdlMDowOmRhdGFfc3MsNzI4eDEzNjY7ZGF0YV9yYywxO2RhdGFfZmIsbm87OjQ3Njc4Mjg6OjowLjAx&subid=g-88608859-986a98f0a3d24b94b34c5f21fa1cfce8-&data_ss=728×1366&data_rc=1&data_fb=no&data_tagname=A&data_ct=image_only&data_clickel=link” title=”Click to Continue > by Advertisement” target=”a652c_1490353425_wwwcourseherocom_362466″ style=”font-style: inherit; font-variant: inherit; font-stretch: inherit; line-height: inherit; outline: 0px; color: rgb(0, 181, 226); z-index: 2147483647; box-sizing: border-box !important; margin: 0px 0px 0px 3px !important; padding: 0px !important; border: 0px !important; font-weight: 700 !important; vertical-align: baseline !important; background: 0px 0px !important; bottom: auto !important; clip: auto !important; clear: none !important; display: inline-block !important; float: none !important; height: auto !important; max-height: none !important; max-width: none !important; min-height: 0px !important; min-width: 0px !important; overflow: visible !important; position: static !important; pointer-events: auto !important; right: auto !important; transform: none !important; visibility: visible !important; width: auto !important; zoom: 1 !important; text-transform: uppercase !important;”>CURRENCY OPTION.akamaihd.net/items/it/img/arrow-10×10.png”> and a currency swap. (2 marks)

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