FINANCE-HUE, Inc., a U.S. corporation is contractually due to receive a payment

FINANCE-HUE, Inc., a U.S. corporation is contractually due to receive a payment

FINANCE-HUE, Inc., a U.S. corporation is contractually due to receive a payment

HUE, Inc., a U.S. corporation is contractually due to receive a payment of CHF 5 million in 6 months. To manage its transaction exposure. HUE has decided to establish a money market hedge. How much will HUE receive in USD today if it puts this hedge in place? The spot rate (european terms) is 1.65 and the six month forward rate is 1.6410. The six month interest rate in Switzerland is .7% p.a. and the six month interest rate in the U.S. is 1.8% p.a.

 

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