Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A construction company in China just bought $2 billion worth of construction machines from CAT to be delivered in 1 year. The contract currency is

image text in transcribed
A construction company in China just bought $2 billion worth of construction machines from CAT to be delivered in 1 year. The contract currency is in RMB. The current exchange rate is $0.1385 per RMB. The one- year forward rate is $0.1415. CAT decided to enter into a forward hedge. If the spot rate in one year turns out to be $0.1365. How much did CAT make/lose on the hedge

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Investing Revolutionaries How The Worlds Greatest Investors Take On Wall Street And Win In Any Market

Authors: James N. Whiddon , Nikki Knotts

1st Edition

0071623949,0071700560

More Books

Students also viewed these Finance questions