Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Corporate Finance

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan, Gordon Roberts, J. Ari Pandes, Thomas Holloway

10th Canadian Edition

1259654753, 9781259654756

More Books

Students also viewed these Finance questions

Question

Discuss whether happier people make more money.

Answered: 1 week ago