Question
Alcoa Chemical, a US company, has sold 3 million chemicals to CPL Co. Payment is due in 90 days. Spot rate:$1.63/ 90-day forward rate$1.59/ 90-day
Alcoa Chemical, a US company, has sold 3 million chemicals to CPL Co. Payment is due in 90 days.
Spot rate:$1.63/ 90-day
forward rate$1.59/ 90-day
U.S. dollar interest rate (annualized)3.2% 90-day
Pound interest rate (annualized)5% 90-day
call option on pound at $1.61/premium $0.03 per pound 90-day
put option on pound at $1.61/premium $0.04 per pound
- What is the hedged value of Alcoa's receivable using the forward market hedge?
- What is the hedged value of Alcoa's receivable using the money market hedge?
- Which of the hedging alternatives analyzed would you recommend to Alcoa? Why?
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Modern Portfolio Theory and Investment Analysis
Authors: Edwin Elton, Martin Gruber, Stephen Brown, William Goetzmann
9th edition
9781118805800, 1118469941, 1118805801, 978-1118469941
