1) A Canadian investor holds a US$ Guaranteed Investment Certificate (GIC) which will mature on March...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1) A Canadian investor holds a US$ Guaranteed Investment Certificate (GIC) which will mature on March 10, 2021 at a value of US $75,000. He intends to cash in the GIC at that time because the bill for his house renovation comes due on March 30, 2021. He is afraid that the USD/CAD exchange rate might move unfavourably between now and then so he wants to fix the rate at which he can covert the US$ GIC proceeds into C$. He has come to you for assistance so you went to the Chicago Mercantile Exchange (CME) website and found the following: Canadian Dollar Micro Futures Quotes Each of the following futures contracts is to buy C$ 10,000 and is quoted as US$ per Canadian Dollar. Bid Ask i. ii. iii. iv. V. Settlement Date Jan 15, 2021 Feb 15, 2021 Mar 15, 2021 Apr 15, 2021 .7853 .7864 .7956 .7968 .7988 .7999 .8034 .8040 Is he afraid that the C$ will strengthen or weaken against the US$ between now and March 2021? Should he be buying or selling the C$ micro futures contracts and how many? For which maturity month? What will his exchange rate be and what will be the total USD price he will pay upon maturity of the contract(s)? Will he have any unsold USD left over after the above futures transaction and if so, what could he do to hedge the C$ conversion price of any left over US$? 1) A Canadian investor holds a US$ Guaranteed Investment Certificate (GIC) which will mature on March 10, 2021 at a value of US $75,000. He intends to cash in the GIC at that time because the bill for his house renovation comes due on March 30, 2021. He is afraid that the USD/CAD exchange rate might move unfavourably between now and then so he wants to fix the rate at which he can covert the US$ GIC proceeds into C$. He has come to you for assistance so you went to the Chicago Mercantile Exchange (CME) website and found the following: Canadian Dollar Micro Futures Quotes Each of the following futures contracts is to buy C$ 10,000 and is quoted as US$ per Canadian Dollar. Bid Ask i. ii. iii. iv. V. Settlement Date Jan 15, 2021 Feb 15, 2021 Mar 15, 2021 Apr 15, 2021 .7853 .7864 .7956 .7968 .7988 .7999 .8034 .8040 Is he afraid that the C$ will strengthen or weaken against the US$ between now and March 2021? Should he be buying or selling the C$ micro futures contracts and how many? For which maturity month? What will his exchange rate be and what will be the total USD price he will pay upon maturity of the contract(s)? Will he have any unsold USD left over after the above futures transaction and if so, what could he do to hedge the C$ conversion price of any left over US$?
Expert Answer:
Related Book For
Posted Date:
Students also viewed these finance questions
-
You shorted 15 March 2016 British pound futures contracts at the high price for the day. Looking back at Figure 14.1, if you closed your position at the settle price on this day, what was your...
-
You went long 20 June 2016 crude oil futures contracts at a price of $42.18. Looking back at Figure 14.1, if you closed your position at the settle price on this day, what was your profit? Figure...
-
On January 1, 2011, the stockholders equity section of Rowen Corporation shows: common stock ($5 par value) $1,500,000; paid-in capital in excess of par value $1,000,000; and retained earnings...
-
Explain why Soil Taxonomy is said to be a hierarchical classification system.
-
Heather Hutchison is a realtor. She organized the business as a corporation on March 10, 2008. The business received $50,000 cash from Hutchison and issued common stock. Consider the following facts...
-
A square concrete foundation is a base for a cylindrical tank (see figure). (a) Write the radius r of the tank as a function of the length x of the sides of the square. (b) Write the area A of the...
-
For Problem 6.8, (a) Fit the corresponding negative binomial model with the same linear predictor. (b) Compare the analysis between part (a) and that from Problem 6.8. 6.8 For the Sexual Health pilot...
-
During Heaton Companys first two years of operations, the company reported absorption costing net operating income as follows: The companys $18 unit product cost is computed as follows: Forty percent...
-
a. Draw a graph of the household production model, for a household shared by a man (m) and a woman (f). Assume that the man's wages are higher (wm > w f) and that the woman is more productive in the...
-
B52 Skate Training prepares adjustments annually and showed the following on its June 30, 2023, year-end: Additional information available at year-end: a. The Prepaid Arena Rental of $182,000 was...
-
Question 12 In interest rate swap, the notional amount is not exchanged during the contract's life O typically changes during the term of the contract is the amount of a specific interest payment to...
-
What does the accuracy assertion mean?
-
What should an auditor do when, after the discovery of a subsequent event, the client does not take appropriate action?
-
As shown in Lewis et al. (2017), fuel swelling in nuclear fuel is caused by the presence of fission gases in small bubbles. Consider a gas bubble of radius \(R\) embedded in a solid medium with no...
-
When inspecting securities, what things should the auditor note?
-
List the assertions for classes of transactions and account balances.
-
What is the ROI, ROA, ROE, quick ratio, and current ratio for the year 2021? Exhibit 1: LaFitte Castle Wines Ltd - Financial Summary for Fiscal Years ending August 31 2021 2022 2023 2024 (est)_...
-
Suppose the government bond described in problem 1 above is held for five years and then the savings institution acquiring the bond decides to sell it at a price of $940. Can you figure out the...
-
You are the senior accountant of a large, publicly traded company that is experiencing a decline of business that management feels is temporary. To meet earnings projections given in its previous...
-
A new accounting standard requires a firm to accrue major new liabilities for employee pensions and benefits. As a result, its debt equity ratio rises to the point where technical violation of...
-
In Section 1.2, we noted a provision of the 2002 Sarbanes- Oxley Act ( SOX) namely, the requirement for the CEO and Chief Financial Officer ( CFO) of public companies to certify the proper operation...
-
Name and briefly explain the three key components of a modern financial system.
-
What are non-banking financial intermediaries? List the different types and briefly explain their role in connecting savers with borrowers in the financial system.
-
Briefly explain the process of asset securitization in the financial system.
Study smarter with the SolutionInn App