ello. I am Tommy. Our group was doing Question 4 of GM. We found the annual report of GM. However, would we use the end of the cash flow as the hedge amount? Also, we only can find the annual report in USD dollars, so how can we find the change in EPS? We need your help and hope you can provide some guides for us. Thanks.

Q4 Using the same set of exchange rate scenarios in Question 3, show the impact on GM's EPS with a (a) 50% hedge policy, and (b) 75% hedge policy, when only transactional exposures are considered. Hint: excess cash reduces the required hedge amount). Answer: Transaction exposure measures estimates changes in the benefit of extraordinary monetary commitments brought about before an adjustment in return rates yet not due to be settled until after the trade rates change. Thus, this sort of openness manages changes in incomes coming about from existing authoritative commitments. a) Transactional exposures(with 50% hedge policy) Cash flow Hedge Un-hedge Total Profit/(Loss) forecast amount amount after (50% hedging Hedging) Exchange CAD CAD CADrate 1682.00 841.00 841.00 CAD 1.5291 USD USD USD USD 17.05 becomes 532.95 550.00 1,082.95 stronger Current 1.5780 USD USD USD exchange 532.95 532.95 1,065.90 rate CAD 1.6269 USD USD USD USD(16.02) becomes 532.95 516.93 1,049.88 weaker Change in earnings per share of GM in 2001 if CAD becomes stronger = 17.05/550 = 0.031 Change in earnings per share of GM in 2001 if CAD becomes weaker = -16.02/550 = -0.02913 Profit/(Loss) after hedging Exchange rate CAD becomes stronger 1.5291 USD 17.05 Current exchange rate 1.5780 CAD becomes weaker 1.6269 USD(16.02)b) Transactional exposures (with 75% hedge policy) Cash flow Hedge Un-hedge Total Profit/(Loss) forecast amount amount after (50% hedging Hedging) Exchange CAD CAD CAD rate 1,682.00 1,261.50 420.50 CAD 1.5291 USD USD USD USD 8.52 becomes 799.43 275.00 1,074.43 stronger Current 1.5780 USD USD USD exchange 799.43 266.48 258.46 rate CAD 1.6269 USD USD USD USD (8.02) becomes 1,074.43 1,065.91 1,057.89 weaker Change in earnings per share of GM in 2001 if CAD becomes stronger = 8.52/550 = 0.01549 Change in earnings per share of GM in 2001 if CAD becomes weaker = -8.02/550 = -0.01458 Profit/(Loss) after hedging Exchange rate CAD becomes stronger 1.5291 USD 8.52 Current exchange rate 1.5780 CAD becomes weaker 1.6269 USD (8.02)