Question
An Indian company imported goods from US. The US manufacturer invoices the shipment in Dollar (USD), and the amount is USD 5 million. The importer
An Indian company imported goods from US. The US manufacturer invoices the shipment in Dollar (USD), and the amount is USD 5 million. The importer needs to pay the amount by 30 October 2023. The data regarding the futures contract as on 10 October 2023 is: Interbank Spot Market USD-INR 80.2725 - 80.2775 NSE futures: USD INR 281023 80.3175- 80.3250 Questions: Explain the process of hedging with currency futures for the above case, if the spot rate turns out to be INR 79.1250 on 28th October. What is the notional loss/profit of the Indian company when compared to the actual spot rate on October 28th? (Assume that the futures settlement rate is the same as the spot rate on the contract expiry date.) Also, if the spot rate was 81.6250 on the expiry date, what would be the companys notional profit for having decided to hedge the exposure? (10 marks)
Extra information - If the answer is Theoretical Answer than is to be explained in more than 1000 words, not to copy answer from internet, parameter for answering the assignment questions - Introduction 20%, Concepts and Application related to the question 60%, Conclusion 20%
& if the answer is Numerical Answer than is to be explained in below parameters, not to copy answer from internet, parameter for answering the assignment questions - Understanding and usage of the formula 20%, Procedure / Steps 60%, Correct Answer & Interpretation 20% and explain in more than 1000 words.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started