Dow Chemical has sold SFr 25 million in chemicals to Ciba-Geigy. Payment is due in 180 days.
Question:
Dow Chemical has sold SFr 25 million in chemicals to Ciba-Geigy. Payment is due in 180 days.
a. What is the hedged value of Dow’s receivable using the forward market hedge? The money market hedge?
b. What alternatives are available to Dow to use currency options to hedge its receivable? Which option hedging strategy would you recommend?
c. Which hedging alternative analyzed in parts a and b would you recommend to Dow? Why?
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Step by Step Answer:
a Dow Chemical can use a forward contract to lock in a value of 20237500 25000000 08095 for its rece...View the full answer
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