Essays on Currencies

Anheuser-Busch InBev’s Takeover of SABMiller

The global beer industry, which has been growing steadily for almost a century now, is filled with variety. There are many types of beer that vary in flavor, production technique, ingredients, color, alcohol levels, and geographic origin. Also, the many brands vary greatly as well. Some brands dominate global beer markets, while other brands are very local - and everything in between. Anheuser-Busch InBev and SABMiller were two of the largest global dominating beermaker companies in existence. Together, they produced around 30% of all beer sold world-wide. The idea of Anheuser-Busch InBev and SABMiller merging was simply astonishing. When ...

Analyze and discuss the Bretton Woods Agreement and state what the agreement was for and why it was created. Include any difficulties they faced in getting society to agree with their proposal. Briefly describe the 'gold standard' evolution and collapse. Response: World War II was over. Europe and Asia was in shambles, both in term of governance as well as from an economic standpoint. In order to resurrect Europe from the state that it was in, the Bretton Woods Conference took place in July 1, 1944. Apart from replacing the gold standard with the American dollar, the conference also ...

Introduction

The paper compares the financial performance of Abcam and Novozymes for the FY 2015. The company (Abcam) spends a lot of cash on research and development. Therefore, it provides easy access to products, high development on the platform of e-commerce. The sales of Abcam increased significantly between FY 2015 and 2016. That is it almost made 90% of sales in other currencies such as the Japanese Yen, and Euro. The change in these foreign currencies during the recession period is favorable for the firm. Moreover, revenues of the product increased by over 15% on the reported basis during FY ...

Introduction

Bank typology has grown more complex as more formerly niche banking services gain greater customer bases, encouraging different banks to shift focus from the traditional retail banking format to a more complex and specialized arrays of banking services. Moreover, large banks, particularly multinational companies, maintain their retail operations while serving non-retail accounts, such as businesses, investors, and purely online customers (Pritchard, 2016). Further, certain organizations offer banking-like services to its members, such as credit unions and savings and loans associations (S&Ls). Thus, to manage this typological complexity, this explorative paper covers only primary forms described in its most typical ...

Macroeconomic and Account Balances

India is seen to react rapidly to volatility in the global economic environment as concurred in the modifications of the macroeconomic policies when the North Atlantic financial crisis occurred (Kapur and Mohan, 2014, p.1). However, India’s policy changes is perceived by Kapur and Mohan (2014, p.1) to be temporarily stimulating to the local economy since the expected growth will gradually slowdown. But the additional effect is that inflationary and BoP pressures remain constant, which can either by improved or worsened by the domestic policy bottlenecks (Kapur and Mohan, 2014, p.1). This was seen during the financial market volatility ...

The emergence of digital currencies and their rapid expansion into international financial markets and the lives of common people has been nothing but a substantial shake-up for the global financial sector. These digital or virtual currencies, often known as cryptocurrencies, employ cryptography to secure and authenticate transactions, as well as to administer the creation of new units. Today, both youngsters and older people know the Bitcoin benefits and Ethereum features: they are decentralized and operate on a peer-to-peer network, giving users more independence and near-absolute anonymity.

In recent years, digital currencies have grown in popularity, and their use has spread beyond ...

International Investments Diversification

International Investments Diversification The term global portfolio refers to a group of investments, assets and securities held in foreign markets rather that the domestic market. Traditionally, investors have preferred to focus on international portfolio investment when it comes to the investment in marketable securities. As opposed to the only domestic portfolios, the international portfolio yields more value for the same level of risk. Ideally, an investor should analyze the global stock market to identify the markets that are related to their domestic stock/ securities market in terms of risks and rewards (Agati, 2007). This helps investors reduce their anxiety ...

An industry entails the production of services and goods by availing utilities to customers or transforming inputs into outputs. The outputs of industry are either used by other manufacturers for further production or by consumers in satisfying their desires. Operations in a particular industry might be the generation, extraction, production or transformation of goods and services at a given price level. There three categories in which industry can be subdivided based on the nature of products in subject or the process of producing it. These types of industries entail: i.)Primary industries This industry entails creating utility by hauling ...

Introduction

Multinational corporations across the world usually consolidate and present their operational results in financial and non-financial terms at the end of every term, usually a year. The financial aspect of reporting is supposed to comply with a clearly prescribed set of regulatory standards. The adoption of the International Financial Reporting Standards and GAAPs was meant to ensure that all compliant firms across the world produce financial statements that conform to the industry specific reporting frameworks and thus achieve a degree of uniformity in reporting. Different firms in operating in multiple locations operate under the strict guidelines of the specific ...

Money and prices in the long run and open economies dictate the financial market. As such, that is why factors such as domestic variables and foreign monetary policies are over-emphasized. Demand for money is thus affected by the domestic variables, which include interest rates, price expectations, and permanent income, among others. As such, this paper explores the financial market to reveal the viable strategies the US can adapt to secure reliable money and prices in an open economy on a long-term basis.

The state of US Financial Market

Over the years, the economy of the US has been in good shape, especially when compared to ...

Introduction

The bank of Dhofar was started with only two branches, One in Salalah and another one in Muscat, and was first incorporated in January 1990 as a public joint stock company in Oman to conduct banking activities for the investment, retail and corporate sectors. At its inception, the bank had the name Bank Dhofar Al Omani al Fransi, which was changed to the current name in 2003 after the bank met all approval requirements. Before the name change, Bank Dhofar Al Omani al Fransi had merged with the Majan International Bank in 2002. Over the years, the bank has ...

Long-term influence of monetary policy

Monetary policy can either be contractionary or expansionary, and both policies impact nominal variables differently in the long-run. Price levels A contractionary policy results in a decrease in equity prices because the income stream is discounted at a relatively higher rate. Also, the price levels of equity can drop since high-interest rates and low supply of money lead to reduced demand for equity. In this case, bonds can be an attractive investment since they pay high interests (Meltzer, 1995). Nevertheless, an increase in interest rates does not always result in fall of share prices. People may interpret the high-interest ...

Electronic Commerce (E-Commerce) has become one of the most influential drivers of the world economy. The increase in traffic for online retailers and companies in all industry continue to grow exponentially. In the last decade, industries like Application Development to Fashion continue to increase their online presence. The effect of this E-Commerce wave has been felt in different countries as their economies grow exponentially. One of the most influential factors that continue to encourage this growth is the global need to become technologically literate. As the world turns towards this new direction, many factors test the legitimacy and importance ...

Financial recess is never a novel term. Depressions have always hit the financial system of the world, and the latest recess America is most likely not the final one. Nonetheless, many issues worked together to make the recent U.S crisis the worst financial recession since the global downturn. These factors include failures of market, weaknesses in the execution of policy, as well as macroeconomic problems. The primary concept, which had controlled economic thinking for many years, was that markets functioned. The appropriate prices often get a buyer as well as a seller. Besides, millions of sellers, as well as ...

What is a cartel? (5 marks)

The companies in a market might collude to set the prices by making explicit or implicit agreements between them on the market price, sharing the market geographically, or controlling the quantity supplied in the market. The agreement between the companies in a specific market might create an oligopoly behaving like a monopoly. The companies might set the price, and all the agreement partners might obey the agreement. If the companies can create a large market power, they might behave like one monopolist. Cartel is the situation of existence of an explicit or implicit agreement between the companies in a ...

The rate at which foreign investments by multinational corporations are carried out has often culminated to the challenge of currency risk which can otherwise be defined as that existing probability of loss resulting from the alterations in the exchange rates between 2 currencies. The following article will, therefore, present a discussion on the necessary steps that can be undertaken by the multi-national enterprises in mitigating the currency risks.

Just as the financial markets of operation have the propensity of making the exchange rates to rise, they also provide a solution for them. Here, investing in the exchange traded funds ...

Garcia C.P.

Econ 2

2016/09/06 Stock Market in China China has two stock markets; Shanghai and Shenzhen that operate independently under the control of the China Securities Regulation Commission. The government agency commission has a lot of control on the actions of companies in the stock markets, from issuing initial public offers to controlling the level of price movements in the markets. The Chinese practices sponsored trading through the Chinese Securities Finance Corporation. In 2015, efforts of the holding company to soften the markets were futile with losses going up to $5 trillion. The government of China prioritizes market stability over ...

Essay one (China’s financial system)

Introduction and Thesis Statement The restoration of an economy from a depression requires a careful adoption of strategies. Various measures that governments use to promote the growth of key sectors as wells the entire economy have severe outcomes which must be considered before they are put in practice. Fundamentally, governments implement different fiscal and monetary strategies to solve economic problems, which may be successful or not. Thus, the analysis of the strategy to be deployed becomes essential to achieve the desired objectives. The financial sector in an economy is of central importance. As such, public policies that impact on ...

Financial Institution Supervision: Insurance Companies

Introduction Insurance, in the simplest terms, means a transference of risk from the insured to the insurer. Around the world, individuals, families and businesses take advantage of the provisions of insurance so as to protect the possibilities of catastrophic losses that could occur due to loss of life or failure of a business. Over a period of time, the insurance industry has matured to throw up a multitude of products, and has grown into a multibillion-dollar industry. The management of risk is the key to the operations of the insurance industry. While insurance agencies have necessary internal checks and ...

ABSTRACT

It is necessary for investors to consider their overall portfolio and analyze which investment option is lagging in which area. Thus, we took all the investment what we were involved in over a given period of time. The three markets taken were stock exchange options, Forex currency trading and bullion trading. Under stock exchange trading options, we considered the investments made in three separate quarters, for Forex trading, we took the two currencies: Euro and Yen and for the bullion trading we invested in gold and silver as precious metals. Later, we found the profit status from all the ...

World War II was bad for Europe. A comedian once said of the first World War that it would have been better for all concerned if the countries involved had simply stayed home and shot fifty thousand of their own people every week, and that sentiment also gives some idea of just how devastated Europe was after the war that followed the war to end all wars (Blackadder Goes Forth 1989). If anything that falls short of it; “unlike World War Onethe Second War—Hitler’s War—was a near-universal experience” (Judt 2005, p. 25). As many as thirty-six ...

Oil Search Limited, established in 1929 in Papua New Guinea has its focus on oil and gas exploration and development . During the course of this long standing relationship with the Government of Papua New Guinea and its people, the company has shown immense commitment in ensuring the welfare of the country and its people through various societal benefit programs. This report focuses on Oil Search Limited; various corporate responsibility programs initiated and implemented the company, and the company’s risk management framework and infrastructure.

Company Overview

Among the various projects, the main asset of the company is its 29% stake in ...

Abstract

This study examined the effects of a fixed currency exchange system on China’s economy as well as global growth. The study analyzed the different economic indicators of China and their relation to the fixed currency system. We predicted that this system had an effect on various sectors of the economy and resulted in economic growth which is consistent with recent research on the benefits of a fixed system to the economy. The system has made goods from China cheap hence increased its exports and strengthened its manufacturing industry which has had a positive effect on global economic growth. ...

International FinanceName of the StudentCourseProfessorUniversityDate

International Finance INTRODUCTION

British Airways is one of the leading airlines in the United Kingdom primarily dealing with vacations and flights internationally. They have several subsidiaries and have increased their fleet to 262 planes. British Airways now has flights to 169 destinations.

Company B: Volkswagen

Volkswagen, Europe’s leading carmaker and one of the most successful global companies, reported a 95 drop in 2003 fourth quarter profits which collapsed from €1.05 billion to a plain €50 million. For all of 2003, Volkswagen’s operating profit fell by 50 percent from the record levels attained in 2002. Although the profit crash had more ...

BUSINESS STUDY REPORT:

This report is devoted to the YEO’s Beverage Company. The report has four main parts. The first part is an introduction where the general information about the company, the environment where it operates and its main competitors are presented. The second part is microeconomic analysis. The factors of production and its cost structure are examined there. The third part macroeconomic analysis where macroeconomic environment in which the business operates are discussed. The forth part is the analysis of sustainability and the impact of business operations on the environment. At the end of the report, there is a conclusion ...

According to IMF (2016), the Special Drawing Rights (SDR) is an international reserve asset created in 1969 by the IMF. Its aim was to supplement member nation’s official reserves. In the beginning, the SDR operated in the context of the Bretton Woods fixed exchange rate system. In this regards, countries that participated in the system needed to hold their national reserve either by the central bank or government in the form of gold or any other broadly acceptable foreign currency. The currency or gold was used to purchase the country's domestic currency in the foreign exchange market to ...

Structural Adjustment Programs (SAPs) are those economic programs which are implemented by the International Monetary Fund (IMF) and World Bank with an aim of improving the economic status of developing countries. This programs were started in the 1980s and loans which were based on the conditions that the borrowers have to abide to. These loans which are offered by the World Bank to the developing countries are referred to as Structural Adjustment Loans. They are called Structural Adjustment Loans because they are meant to adjust the structural development of these developing countries. The loans are meant to remove the ...

PERSONAL FINANCE INVESTMENT IN QATAR: INVESTING QR 1000000

Abstract This article describes a personal finance project which entails the investment of QR 1000000 in a short time frame, from 1 March to 27 May 2016. We first define personal finance and establish the five steps of a personal financial planning process, which entails: (1) assessment of the individual’s financial situation; (2) determination of the individual’s financial goals; (3) creation and details of the financial plan, based upon the determined goals; (4) execution of the aforementioned plan; (5) monitoring and reassessment of the plan. For each one of the five stages, we carry out the required ...

Definition of Binary Options

An option is a derivative contract where an investor possesses rights to purchase and sell assets such as commodities, foreign currencies, and common shares etc . There are two types of options like traditional, regular or vanilla options as well as binary or digital options. The market dynamics and mechanics for options contracts are same in every economy. The only difference relies in the manner in which options trading is regulated in each country. In derivatives, binary option represents a trading form where traders or investors predict movement in the prices of underlying assets, commodities and securities etc. The word “ ...

Introduction

The exchange rate has become an integral component of modern economics. Its role stems from its far-reaching effects on the economy of a country, investments, the profitability of firms, and personal finances. Countries have become even more interdependent due to the rapid advancement in communication technologies and the expansion of global trade, which have significantly reduced the geographical distance between both individuals and countries. However, since nations use a broad range of domestic currencies with different values, trading partners must, therefore, rely on currency conversion methods to facilitate global transactions. This paper explores the importance of exchange rate and ...

Bank of America: Broadening Internet Frontiers

Introduction With the advent of various digital technologies, the banking industry experienced serious changes (Andal-Ancion, Cartwright & Yip, 2003). Thus, the biggest portion of communicational and significant part of transactional activities shifted from real to the web area. However, together with advantages, the development of web-technologies pose a number of serious challenges, which should be always accentuated by the managers of Bank of America. The purpose of this research is to examine web-technology aspects relatable to the development of this institution. In particular, this paper evaluates current areas of using web-technology by Bank of America, and analyses the potential of ...

Describe the different courses of the Revolutionary War in New England, the middle colonies, and the South. What role did the battles in each region play in the eventual American victory? The American Revolutionary War was characterized by three phases being the New England phase, the middle colonies phase, and the Southern phase, which took place between 1775 and 1783 (Grossberg & Tomlins, 2008). New England colonies consisted of 13 colonies, which included Rhode Island colonies, Massachusetts, Providence Plantation, and New Hampshire among others. France attempted on several occasions to colonize New England but failed. New England, mainly carried out ...

Question 1

Sources of the problem facing Wight Despite Wright comprehend and being clear on his mandate as the Clearwater Seafood’s Chief Financial Officer (CFO) he had faced several challenges. As CFO, he was required to determine the best way to incorporate company’s foreign exchange risk management program into the overall growth strategy of the firm. The company has been benefiting from a weak Canadian dollar. However, strengthening of the Canadian dollar has become a source of the problem that Wight is facing. According to the article, as the Canadian dollar falls, the company’s foreign exchange risk management ...

Pertaining to the scenario in which the Thai government decided to peg their currency (the Thai Baht) to the U.S. dollar, Thailand could possibly experience inflation due to the artificial valuation of their currency to a more established currency, (Moreno, R., 2000). That being said, the United States would not experience inflation as a result of this agreement. In fact, the United States would benefit because the Thai government would have to invest in the United States stock market and the Thai stock market, which would invariably help the United States economy, (Moreno, M., 2000). Relating to import/exports and ...

Introduction

Money plays a vital role in the determination of income and employment . interest rate are a significant determinant of aggregate spending ad the Federal Reserve which controls the money growth and the interest rates is the first institution to be blamed when the economy of in trouble. Now the question arises what is money.

Money Definition

Money is a medium of exchange. Money is divided into commodity money and token money. To some economist there is difference between commodity money and token money. A commodity money is a medium of exchange which has a commodity value as distinct from a value ...

(A case for a parent firm in a net oil exporting country with subsidiaries in a net importing country that has free market economy, politically stable, positive currency speculation and possibility of government defaulting on its debt)

Oil Prices and Exchange Rate

Oil price dynamics have a bearing on the ability of multinational to precisely model the future exchange rates. In most instances, in order to manage the foreign exchange rate risk that the firm is exposed in the international business arena, most multinational will hedge against the risks that are associated with exchange rate fluctuations. As a result, these multinationals minimize the possible ...

Adam Smith:

Adam Smith was born in Scotland June 16, 1723. He is one of the most revered personalities in the history of the United States (Hanley 40). After the age of 15, he joined Glasgow University where he commenced his philosophy studies. Adam Smith later attended Oxford’s Balliol College in the 1740s. After graduating, he traveled extensively across Scotland, lecturing the public on his economic philosophy. He was a strong believer in the free market economy, which he considered as a system of natural liberty. The Wealth of Nations remains one of the Smith’s most famous works in ...

The problem of the exchange rate differences between different currencies is the special issue to be defined in the process of estimation of the company real value. The interrelation dollar-sterling equals approximately 1.5 % as for the 1983 year. This correlation means that the pound sterling is devaluated currency comparing to dollar. The worth of the pound sterling is higher than that of the dollar. It is well-known fact that the stronger is the currency the more profitable are the investments made in this currency. From this only statement and the dollar/pound correlation we may make the conclusion that the ...

On first January 1999, eleven European countries decided to denominate their currencies into a single currency. The 1991 Maastricht Treaty had established a convergence criterion for countries wishing to join the European Monetary Union (EMU). The criterion was designed to be a foundation for qualifying for the EMU and related to the size of national debts, interest rates, inflation and budget deficits. The Euro system consisted of the European Central Bank with eleven central banks of the participating states presuming the roles in monetary policy (Mody et al. 2012). In 2002, the Euro took the form of coins and ...

Inflation in USA

Inflation in US Introduction Inflation refers to the rate at which the country is experiencing the general increase in prices of goods and services. When the rate of inflation is high, the purchasing power of the country’s currency will be low at the same time. This will comparably imply that higher amount of money is needed to purchase items that had been previously purchased at lower amounts of the same currency. The country’s currency would have lost the real value as a unit of account and as a medium of exchange of the economy. The chief measure ...

Purchasing power parity is used in comparing prices and currency values between two countries in an attempt to determine how exchange rate will change in the long run. The tool helps investors to know whether a given currency is overvalued or undervalued. The theory is based on the argument that exchange rates move up and down in an attempt to get their correct value. This is because an identical basket of goods and services should have the same price (value) in two different countries despite pricing the basket in different currencies. For example, the price of Big Mac should ...

Risk Management at Old Mutual Group

Old Mutual risk management strategies are shaped by the potential impacts on the company's reputation, earnings, liquidity and future sustainability. They are strategic, and the companies closely monitor them. Owing to various strategic changes that the company underwent in the period under review, strategic execution risk is the principal risk facing Old Mutual. The company is faced with other principal risks including, economic situations in the country of operation, shifting credit risk across the group and currency devaluations. There are also other inherent potential risks owing to the changing customer needs, market exposures, liability insurance risks, and interest volatility. ...

Introduction

Monetary policy and fiscal policies are important aspects of the analysis of the U.S economy, as they have a significant impact on the growth of the economy. Moreover, the two types of policy issues are always in active use in the country although the media offers much attention on various economic indicators. Nonetheless, both monetary and fiscal policies have a significant role in the development of an economy and must work together as they cannot exclusively work on their own. Fiscal policy works using tax and spending changes to impact on an economy in diverse ways. However, for any ...

China Stock Market and Currency

Shanghai Stock Exchange (SSE) is one of the largest stock markets in the world. The market has over a thousand listed companies, over 6700 listed securities, and over 1100 stocks. Chinese stock market has witnessed sporadic growth that is fueled by the fast economic growth that has been witnessed over the last thirty years. The economic growth was driven by the adoption of various economic reforms and opening up of China to the world. China is now integrated into the global economy and plays a major role in the stabilization of the regional and as well the world economy. ...

Reasons for the severe decline in Chinese Stock market in 2015

Between June 2014 and June 2015, the CSI 300 Index rose by 150%, reaching the peak at 5,166.3 on 12th June 2015. What follows was a severe decline in the stock index. Within just one month, the CSI 300 index had lost 30% to 3,507 on July 8. Several factors caused the fall.

Short selling

In the run-up to the stock market decline, investors were aggressively involved in short selling and margin trading. Short-selling and margin trading allowed investors to purchase shares using borrowed money thereby increasing the demand for stocks. Investors engaged in short-selling sell stocks borrowed from ...

Modeling Exchange Rates

Oil price dynamics will have a bearing on the ability of multinational to precisely model the future exchange rates of the foreign exchange in the countries that they operate. In most instances, in order to manage the risk that the firm is exposed in the international business arena, especially on the foreign exchange rate, most multinational will hedge against the risks that are associated with fluctuations in the exchange rate thus minimizing the possible negative effect that a firm may experience (Jain, 2007). Therefore, in order to take a position in hedging facilities such as currency futures, the firm ...

Coca Cola most recent financial statements for the year the fiscal year ended 31st December 2015, addresses foreign currency exchange risk in Item 7A. Quantitative and Qualitative Disclosers about Market Risk (Coca Cola, 72). The company faces significant foreign exchange risk because it operates in 72 currencies and earns $23.934 billion from operations outside the United States (Coca Cola, 72). Coca Cola operates in over 200 countries and faces three types of foreign exchange risk, transaction risk, translation risk, and economic risk. The company manages its foreign exchange rate risk on a consolidated basis. The transaction risk is the ...

Introduction

Over the years, several researchers have consistently argued that religion play a bigger role in any form of economic development (Neill, 2010). Some have pointed out to the issue by claiming that the role is quite conspicuous and cannot be overlooked, well, the subject remains an issue of controversy; it attracts diverse opinions from all walks of life. However, several inquiries into the study have indeed pointed towards the direction, above all, they conclude by citing a close proximity between religions and the economic spur (Michael, 2012). Most importantly, some of these researchers have proposed that the topic of ...

Kyle Torpey. “Hyperinflation in Venezuela: How Bitcoin May Help.” Inside Bitcoins. The problem with the Venezuelan economy is that it has been collapsing for a long time so far. Bolivar, endemic currency, has lost in value so significantly that nowadays even the biggest bill in the Venezuelan system costs maximum sixty American cents. That is why the Venezuelan economy badly needs a boost. Potentially a very good boost of Venezuelan economy may be introducing bitcoin. The idea is to trade bolivars to bitcoins and therefore reduce the amount of bolivars in Venezuela therefore increasing their value. However, there is ...

Finance

Treasury Risk Management (a) (a.1)

The forward rate is:

Forward rate = 1.4010 + 0.095 Forward rate = 1.4105 Payment in six months: 8.5 million euros. Payment in GBP = 6,03 million GBP (a.2) 8.5 million EUR are 85000 options paid: Call: 1.2 * 85000 = 102000 GBP in paid premium Put: 1 * 85000 = 85000 GBP in paid premium Both strike options are different from the two values of currency exchange 1.37 EUR/GBP and 1.43 EUR/GBP. The results will be: 8,5 million EUR / 1.42 = 5,985,915.49 GBP – 102000 GBP = 5,883,915.00 GBP 8,5 million EUR / 1.4180 = 5,994,358.00 GBP – 85000 GBP = ...

Abstract

The recent activity of PBOC (People’s Bank of China), the devaluation of Yuan with respect to dollar, is often seen as one of their strategic measures to boost the poorly performing export industry of China. Many international exporters from outside of China have been severely hit by this move as the costs of Chinese products declined tremendously. This incident is proves that international markets are always clouded by numerous risk factors such as the one mentioned above. But that should not be deterrent for businesses trying to venture into international trades. In most of these cases, speculative business ...

The article being discussed is titled ‘ECB Reopens Door to Fresh Rate Cuts’ which appeared in The Wall Street Journal on March 18, 2016. The article reviews latest comments by ECB chief economist on the possibility of ECB cutting rates even further into negative territory and what impact the move might have on global markets. About two weeks back, ECB President Mario Draghi had mentioned that ECB might not cut rates any further. This had caused Euro to rise significantly against the US Dollar. This latest statement by the chief economist of ECB has been described as a balancing ...

Net receipts

When the exchange rate is GBP1 = EUR1.37

Option 1: Forward contract

We subtract the forward points from the spot rates since the bid forward point is greater than ask forward points. Beck Plc. will have 8.5 million euros hence it will buy British pounds at the ask rate. Amount receivable = 8,500,0001.4047 = GBP 6,051,114.11 Net amount received = amount receivable – forward contract cost/premium = 6,051,114.11 – 0 = GBP 6,051,114.11

Option 2: Option hedge

We use a put option since it is a receivable. The spot rate is more favourable than the exercise rate hence Beck Plc. will not exercise the option. Amount receivable = ...