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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 dirhams, payable in six months.
Sixmonth call options on dirhams at an exercise price of dirhams per dollar are available from Bank AlMaghrub at a premium of Sixmonth put options on dirhams at an exercise price of dirhams per dollar are available at a premium of 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 US dollars will Micca pay in months without a hedge if the expected spot rate in months is assumed to be dirhams per dollar? dirhams per dollar?
b How much in US dollars will Micca pay in months with a forward market hedge?
c How much in US dollars will Micca pay in months with a money market hedge?
d How much in US dollars will Micca pay in months with an option hedge if the expected spot rate in months is assumed to be less than dirhams per dollar?
e What is your recommendation?
a How much in US dollars will Micca pay in months without a hedge if the expected spot rate in months is assumed to be dirhams per dollar?
Round to the nearest cent.
Data table
tableAssumptionsValuesShipment of phosphates from Morocco, Moroccan dirhams,
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