Question
Royal Dutch Shell (RDS) acquires ethanol fuel from Brazilian Cosan energy company to blend with their gasoline. The Ethanol costs 35 million Brazilian Real (BRL)
Royal Dutch Shell (RDS) acquires ethanol fuel from Brazilian Cosan energy company to blend with their gasoline. The Ethanol costs 35 million Brazilian Real (BRL) to grow the corn and convert it to ethanol. RDS doesn't have BRL, so they must use the futures market to acquire the currency.
What is the optimal number of BRL/USD futures contracts for Shell to take to receive the entire amount of Real at delivery.
- 1 BRL = 0.20 USD
- 1 BRL/USD futures contract is for 100,000 reals
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
16th edition
125927716X, 978-1259687969, 1259687961, 978-1259277160
