Question
A company just exported a plane to Spain and its payment of 10millions is due in 1 year. The information the company has from the
A company just exported a plane to Spain and its payment of 10millions is due in 1 year. The information the company has from the financial markets is the following:
Spot $/ (bid - ask) | 1.3 1.5 |
1 year Forward $/ (bid -ask) | 1.2 1.4 |
Spot / (bid - ask) | 1.02 1.04 |
1 year Forward / (bid - ask) | 1.25 1.30 |
1 year Interest Rate in $ | 2% |
1 year interest rate in | 4% |
Knowing that there is no possibility to invest in (i.e. you can use only for swap), list and evaluate all the risk-hedging alternatives the company has in order to maximize its revenue in 1 year. Clearly describe all the steps. What would you choose to do?
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