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Callisto Holdings is a firm in the resource extraction industry that is headquartered in France. The firm has a CAD2,822,320 obligation to a supplier that
Callisto Holdings is a firm in the resource extraction industry that is headquartered in France. The firm has a CAD2,822,320 obligation to a supplier that must be paid exactly 55 days from today (at t=55 ). As Chief Financial Officer of Callisto Holdings, you are evaluating several alternatives for hedging this Canadian dollar obligation. One option under consideration are futures contracts on the Canadian dollar, which mature in exactly 60 days (at t=60 ) and are currently priced at EUR0.9223/CAD. Each futures contract on the Canadian dollar has a size of CAD125,000. Alternatively, forward contract priced at EUR0.9210/CAD is available, which your banker has tailored to perfectly match your underlying Canadian dollar exposure. Today's spot rate on the day that you are making your hedging decision is EUR0.9060/CAD. The below table shows the prices of the above futures contract and the spot rate in the period around the payment of your obligation. All values are the closing prices for that day. Your policy when hedging with derivatives is to use the nearest whole number of contracts to the value of your exposition on to any the day of the underlying transaction. If you hedged using futures, what is the realized Euro value of your obligation on its payment date? a. EUR2,595,123.24 b. EUR2,599,221.99 c. EUR2,603,025.74 x d. EUR2,329,529.78 Callisto Holdings is a firm in the resource extraction industry that is headquartered in France. The firm has a CAD2,822,320 obligation to a supplier that must be paid exactly 55 days from today (at t=55 ). As Chief Financial Officer of Callisto Holdings, you are evaluating several alternatives for hedging this Canadian dollar obligation. One option under consideration are futures contracts on the Canadian dollar, which mature in exactly 60 days (at t=60 ) and are currently priced at EUR0.9223/CAD. Each futures contract on the Canadian dollar has a size of CAD125,000. Alternatively, forward contract priced at EUR0.9210/CAD is available, which your banker has tailored to perfectly match your underlying Canadian dollar exposure. Today's spot rate on the day that you are making your hedging decision is EUR0.9060/CAD. The below table shows the prices of the above futures contract and the spot rate in the period around the payment of your obligation. All values are the closing prices for that day. Your policy when hedging with derivatives is to use the nearest whole number of contracts to the value of your exposition on to any the day of the underlying transaction. If you hedged using futures, what is the realized Euro value of your obligation on its payment date? a. EUR2,595,123.24 b. EUR2,599,221.99 c. EUR2,603,025.74 x d. EUR2,329,529.78
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