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It is October 14, 2021, and Hoola Inc. has hired a Canadian IT firm to upgrade its systems. The work will take 6 months and
It is October 14, 2021, and Hoola Inc. has hired a Canadian IT firm to upgrade its systems. The work will take 6 months and cost CAD1.5 million. Hoola wants to know whether to buy the CAD now or in six months. The data are below: $ equivalent CAD spot price now 1.2357 CAD 6-month forward 1.2375 Future price is (better)/worse by What should Hoola do? Buy now!
April 14, 2022 Spot Price Unhedged Position Hedged Position Gain/(Loss) from Hedge 1.2400 1.2390 1.2380 1.2370 1.2360 Use the spot rates shown above to calculate the unhedged positions in 6 months. Compare these to the hedged amount and show a gain/(loss)
| It is October 14, 2021, and Hoola Inc. has hired a Canadian IT firm to upgrade its systems. The work will take 6 months and cost CAD1.5 million. Hoola wants to know whether to buy the CAD now or in six months. The data are below: | |||
| $ equivalent | |||
| CAD spot price now | 1.2357 | ||
| CAD 6-month forward | 1.2375 | ||
| Future price is (better)/worse by | |||
| What should Hoola do? Buy now! |
| April 14, 2022 Spot Price | Unhedged Position | Hedged Position | Gain/(Loss) from Hedge |
| 1.2400 | |||
| 1.2390 | |||
| 1.2380 | |||
| 1.2370 | |||
| 1.2360 | |||
| Use the spot rates shown above to calculate the unhedged positions in 6 months. Compare these to the hedged amount and show a gain/(loss) |
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Financial and Managerial Accounting the basis for business decisions
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
18th edition
125969240X, 978-1259692406
