Money Market Hedging

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This year has been an introduction to firsts for the Thor Corporation:

An opportunity to buy brackets in Brazil for the same quality at half the cost.

Bought 10,000 brackets at 6BR for a total of 60,000BR, paid and delivered in two installments (July 1, 2010, and January 1, 2011 letter of credit payable 90 days after shipment).

An exporting opportunity to Great Britain for benefit fo the World Economy.

Sold 2,000 speakers at 200BP each for a total of 400,000BP (200,000BP per installment, July 1, 2010, and January 1, 2011, payable to Thor 90 days after shipment from Thor Corporation).

Hedge calculations: 60,000 *1.12 = 53,571.43. Convert 53571.43 at current spot exchange rate of 1.56BR = 80,357.14USD. Invest currency in treasury bills at .19% for six-month maturity. Collect receivables from Great Britain transaction to repay the loan. Receive maturity from treasury bill - 95625USD.

Recommendations are to use the income from the treasury bills over a six month period in order to finance the transaction charges from investing and borrowing in Britain and Brazil. This will cover the transaction costs and assure that Thor Corporation can capitalize on the forward rate.