On July 1, an American auto dealer enters into a contract to purchase 20 Mercedes sports cars
Fantastic news! We've Found the answer you've been seeking!
Question:
On July 1, an American auto dealer enters into a contract to purchase 20 Mercedes sports cars with payment to be made in Euros on November 1. Each car will cost Euros 40,000. Dealer want to hedge the deal for foreign currency risk.
July 1 Spot rate $1.1000 per Euro
December futures contract for 125,000 Euros is trading at $1.0900 per Euro on July 1
November 1
Spot rate $1.1100 December Euro futures is trading at $1.1090
Construct a hedge and show how the car dealer profits or loses with the hedge.
Related Book For
Auditing Cases An Interactive Learning Approach
ISBN: 978-0132423502
4th Edition
Authors: Steven M Glover, Douglas F Prawitt
Posted Date: