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On January 12, Centene Company (a U.S. firm) purchases a futures contract specifying 12,565,000 Danish Krone with the June settlement date to hedge its
On January 12, Centene Company (a U.S. firm) purchases a futures contract specifying 12,565,000 Danish Krone with the June settlement date to hedge its exchange rate risk of 12,565,000 Danish Krone when it orders supplies from a Denmark supplier in June. This futures contract is priced at $0.15 per Danish Krone. On February 15th, Centene Company realizes that it has no need for 12,565,000 Danish Krone in June since it will not need to order supplies. Centene Company thus sells a futures contract specifying 12,565,000 Danish Krone with the June settlement date to offset the contract purchased in January. This futures contract is priced at $0.17 per Danish Krone. What is the result of these transactions to Centene Company?
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Based on the image you sent Centene Company entered into two futures contracts to hedge its exchange rate risk for 12565000 Danish Krone DKK it needed to purchase supplies from a Denmark supplier in J...Get Instant Access to Expert-Tailored Solutions
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