Essays on Pound Sterling

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 ...

Introduction

Pakistan is a developing country and is the 26th largest nation in terms of purchasing power parity. A member of BRICS community, the nation has shown signs of becoming one of the world’s largest economies by 2025. In the past, the country had suffered from the ills of political disputes, energy constraints, poverty, growing population and non-conducive business environment that had halted the growth of the country. However, during the past few years, Pakistan has shown some optimistic signs of economic improvement with consistent growth in GDP and other macro-economic factors. Still, many factors such as social and ...

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 = ...