Page 214 - AFM Integrated Workbook STUDENT S18-J19

Chapter 10

Solution

Convert all amounts into £ before entering them into a table:

Owed by Owed to

Parent Sub Outside Total

£m £m £m £m

Parent 0.80 2.18 2.98

Sub 4.33 1.73 6.06

Outside 2.00 3.42 5.42

––––– ––––– –––––

Owed to 6.33 4.22 3.91

Owed by (2.98) (6.06) (5.42)

Net 3.35 (1.84) (1.51)

So to settle these amounts, Sub Co needs to pay Parent Co £1.84m and
Outside Co needs to pay Parent Co £1.51m (i.e. just two transactions that
need hedging).

Illustrations and further practice

Now try TYU 8 in Chapter 10

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