1. The tmcc security is bought and sold on the New York stock exchange. If you looked at the price today, do you think the price would exceed the $24,099 original price? Why? If you looked in 2018, do you think the price would be higher or lower than today’s price? Why?
2. What are the three ways in which derivatives can be misused?
3. Assume the following information
180 day US interest rate = 8%
180 day British interest rate = 9%
180 day forward rate of British pound = 1.50
Spot rate of British pound = 1.48
Assume that Riverside Corp. from the United States will receive 400,000 pounds in 180 days. Would it be better off using forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge and show all work.