GGG Bikes, a Canadian MNC, signed in Oct-19 an agreement to export bikes to the British...

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GGG Bikes, a Canadian MNC, signed in Oct-19 an agreement to export bikes to the British cycling team INEOS. The agreement included two payments, 1 million GBP in 3-months (Jan-20) and 3 million GBP in 6-months (Apr-20). GGG is a young company, so to avoid more risk the management decided to contract forwards to eliminate exchange risk. The quotes provided in the following slide were the ones available to GGG in Oct-19. i. Use the following quotes to calculate the CAD cash-flows ii. If the spot rate in Jan-20 was and Apr-20, did the forward contracts generated a loss or a gain? iii. Was contracting forwards profitable ex-post? GGG Bikes, a Canadian MNC, signed in Oct-19 an agreement to export bikes to the British cycling team INEOS. The agreement included two payments, 1 million GBP in 3-months (Jan-20) and 3 million GBP in 6-months (Apr-20). GGG is a young company, so to avoid more risk the management decided to contract forwards to eliminate exchange risk. The quotes provided in the following slide were the ones available to GGG in Oct-19. i. Use the following quotes to calculate the CAD cash-flows ii. If the spot rate in Jan-20 was and Apr-20, did the forward contracts generated a loss or a gain? iii. Was contracting forwards profitable ex-post?

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Solution i Use the following quotes to calculate the CAD cashflows Oct19 GBPCAD 17000 Jan20 GBPCAD 1... View the full answer