Perkins Corp. will receive 250,000 Jordanian dinar (JOD) in 360 days. The current spot rate of the dinar is $1.48, while the 360-day forward rate is $1.50. How much will Perkins receive in 360 days from implementing a money market hedge (assume any receipts before the date of the receivable are invested)?

Question

Perkins Corp. will receive 250,000 Jordanian dinar (JOD) in 360 days. The current spot rate of the dinar is $1.48, while the 360-day forward rate is $1.50. How much will Perkins receive in 360 days from implementing a money market hedge (assume any receipts before the date of the receivable are invested)?
a. $372,500
b. $375,000
c. $370,000
d. $365,000

GPT 3.5 · Answer

To calculate the amount that Perkins Corp. will receive in 360 days from implementing a money market hedge, we need to consider the spot rate and the 360-day forward rate.

At the current spot rate of $1.48/JOD, the amount in USD that Perkins will receive is:

250,000 JOD * $1.48/JOD = $370,000

However, by implementing a money market hedge, Perkins can use the 360-day forward rate of $1.50/JOD. This means that the amount in USD that Perkins will receive is:

250,000 JOD * $1.50/JOD = $375,000

Therefore, the correct answer is b. $375,000.