Question
A company needs to pay in six months for a total of 3 Million USD. As of today, the spot exchange rates are 1.24/1.26 CAD/USD
A company needs to pay in six months for a total of 3 Million USD. As of today, the spot exchange rates are 1.24/1.26 CAD/USD and the sixmonth forward rates are 1.27/1.29 CAD/USD. It can buy the six-month option on USD with an exercise price of 1.27 and a premium of 0.05 CAD per USD for the call and 0.07 CAD per USD for the put. Assume that your expected future spot exchange rate is the same as the forward rate.
Conclude on what hedge is better for the company.
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Financial Literacy For Young Adults Simplified Discover How To Manage Save And Invest Money To Build A Secure And Independent Future
Authors: Raman Keane
1st Edition
8399806501, 979-8399806501
