Question
A company hedged forward on the FOREX futures market by buying 10 million Euros at EUR/AUD at 0.64 to pay for a BMW delivery in
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A company hedged forward on the FOREX futures market by buying 10 million Euros at EUR/AUD at 0.64 to pay for a BMW delivery in Germany. At expiration, in one year, the spot EUR/AUD was 0.625. What were the cash flows?
a. Spot cost of BMWs -$ 15,625,000
Futures payoff -$ 375,000
Net payout -$ 16,000,000
b. Spot cost of BMWs -$16,000,000
Futures payoff -$ 375,000
Net payout -$15,625,000
c. Spot cost of BMWs $16,000,000
Futures payoff -$ 375,000
Net payout $15,625,000
d. Spot cost of BMWs -$ 16,000,000
Futures payoff +$ 375,000
Net payout -$ 15,625,000
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Investments Analysis And Management
Authors: Charles Jones, Nick Jones
11th Edition
0470477121, 9780470477120
