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Micca Metals, Inc. Micca Metals, Inc. is a specialty materials and metals company located in Detroit, Michigan. The company specializes in specific precious metals and

Micca Metals, Inc. Micca Metals, Inc. is a specialty materials and metals company located in Detroit, Michigan. The company specializes in specific precious metals and materials that are used in a variety of pigment applications in many industries including cosmetics, appliances, and a variety of high tinsel metal fabricating equipment. Micca just purchased a shipment of phosphates from Morocco for 6,100,000 dirhams, payable in six months.
Six-month call options on 6,100,000 dirhams at an exercise price of 10.20 dirhams per dollar are available from Bank Al-Maghrub at a premium of 1.6%. Six-month put options on 6,100,000 dirhams at an exercise price of 10.20 dirhams per dollar are available at a premium of 3.1%. Using the exchange rate and interest rate data in the popup window, , compare alternate ways below that Micca might hedge its foreign exchange transaction exposure.
a. How much in U.S. dollars will Micca pay in 6 months without a hedge if the expected spot rate in 6 months is assumed to be 10.20 dirhams per dollar? 10.70 dirhams per dollar?
b. How much in U.S. dollars will Micca pay in 6 months with a forward market hedge?
c. How much in U.S. dollars will Micca pay in 6 months with a money market hedge?
d. How much in U.S. dollars will Micca pay in 6 months with an option hedge if the expected spot rate in 6 months is assumed to be less than 10.20 dirhams per dollar?
e. What is your recommendation?
a. How much in U.S. dollars will Micca pay in 6 months without a hedge if the expected spot rate in 6 months is assumed to be 10.20 dirhams per dollar?
(Round to the nearest cent.)
Data table
\table[[Assumptions,Values],[Shipment of phosphates from Morocco, Moroccan dirhams,6,100,000
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