Question
1. On April 1, the spot price of the British pound was $1.86 and the price of the June futures contract was $1.85. During April
1. On April 1, the spot price of the British pound was $1.86 and the price of the June futures
contract was $1.85. During April the pound appreciated, so that by May 1 it was selling for
$1.91. What do you think happened to the price of the June pound futures contract during April?
Explain.
2. Suppose that Texas Instruments must pay a French supplier 10 million in 90 days.
a. Explain how TI can use currency futures to hedge its exchange risk. How many futures
contracts will TI need to fully protect itself?
b. Explain how TI can use currency options to hedge its exchange risk. How many options
contracts will TI need to fully protect itself?
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How To Value Buy Or Sell A Financial Advisory Practice
Authors: Mark C. Tibergien, Owen Dahl
1st Edition
1576601749, 978-1576601747
