A Turkish car manufacturing company needs to purchase new hydraulic press machine for its new plant....
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A Turkish car manufacturing company needs to purchase new hydraulic press machine for its new plant. It is January 23 and the spot rate is TL. 29.77 per $. The company's financial manager knows that it will have to pay $30 million on October 20 for the press machine it has bought from a US supplier. How can this company hedge its foreign exchange risk by; a. i. Futures contracts if the October futures (20th of October) delivery price is TL31,4 per USD and one contract is for $100,00? Draw a graph showing the profit or loss per $ for the position of the company. ii. How much money must be deposited in the company's margin account for enabling it to take a position in the futures market which completely eliminates its foreign exhange risk if the initial margin requirement is TL20,000 per contract? iii. Maintanence margin requirement for a contract is TL15,000. At what rate does the company's financial treasurer receive a margin call from the broker? b. i. An option contract for October 20, while the premiums of call and put options on dollar are TL0.5 and TL0.7 respectively, at the same exercise price of TL31,4 per dollar? Plot a graph illustrating the option cash flow schedule. ii.Locate the break-even point for the option. Show on the graph where the option becomes in-the-money, at-the-money and out-of-the-money. A Turkish car manufacturing company needs to purchase new hydraulic press machine for its new plant. It is January 23 and the spot rate is TL. 29.77 per $. The company's financial manager knows that it will have to pay $30 million on October 20 for the press machine it has bought from a US supplier. How can this company hedge its foreign exchange risk by; a. i. Futures contracts if the October futures (20th of October) delivery price is TL31,4 per USD and one contract is for $100,00? Draw a graph showing the profit or loss per $ for the position of the company. ii. How much money must be deposited in the company's margin account for enabling it to take a position in the futures market which completely eliminates its foreign exhange risk if the initial margin requirement is TL20,000 per contract? iii. Maintanence margin requirement for a contract is TL15,000. At what rate does the company's financial treasurer receive a margin call from the broker? b. i. An option contract for October 20, while the premiums of call and put options on dollar are TL0.5 and TL0.7 respectively, at the same exercise price of TL31,4 per dollar? Plot a graph illustrating the option cash flow schedule. ii.Locate the break-even point for the option. Show on the graph where the option becomes in-the-money, at-the-money and out-of-the-money.
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