Assume today is the 21st of February. Using the information below, FT Extract, answer the following...

 

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Assume today is the 21st of February. Using the information below, FT Extract, answer the following questions (parts i and ii). You work for a US company that is due to receive £250 million in June (you are a US exporter). You, as a treasurer of the company, have decided to use currency futures to hedge the currency exposure risk of this transaction. FT Extract CURRENCY FUTURES Feb 21 €-Sterling* €-Yen* $-Can $ t $-Euro € + $-Euro € + $-Sw Franc Open Sett Mar 0.7577 0.7561 Mar 158.99 158.50 Mar 0.9871 0.9886 Mar 1.4707 1.4809 +0.0102 1.4658 1.4758 +0.0101 Jun Mar +0.0086 0.9099 0.9188 0.9270 0.9328 +0.0066 Mar Jun 0.9318 0.9378 $-Sterling + Jun 1.9385 1.9588 $-Aust $t Mar 0.9170 $-Mex Peso Mar 92575 $-Yen t $-Yen t i. Change High -0.0022 0.7578 -0.20 159.06 +0.0013 0.9930 1.4830 1.4777 0.9208 0.9177 92425 ii. 0.9350 +0.0067 0.9398 +0.0186 1.9618 +0.0017 0.9185 92675 Est. vol Low 0.7544 81 158.70 770 0.9856 49,780 1.4694 177,173 1.4645 681 0.9065 70,032 0.9246 139,596 0.9299 455 1.9385 96,949 Open int 9,618 11,369 85,628 201,842 7,047 65,235 Sources: NYBOT; Sterling €100,000 and Yen: €100,000. †CME: Australian $: A$100,000, Canadian $: C$100,000, Euro: €125,000; Mexican Peso: 500,000, Swiss Franc: SFr125,000; Yen: ¥12,5m ($ per ¥100); Sterling; £62,500. CME volume, high & low for pit & electronic trading at settlement. Contracts shown are based on the volumes traded in 2004. 209,752 28,752 94,194 88,438 0.9143 34,035 92250 21,158 137,661 Using the information content is FT Extract above set out the hedge. Assume that you will receive £250 million on the same day as the une futures contracts mature. The exchange has a total spread of $0.04 on the average quote. Estimate the cash flows in June if the actual exchange rate and the future price is $1.99/£1 on the day you receive the £250 million and close your futures position. 16- ral Assume today is the 21st of February. Using the information below, FT Extract, answer the following questions (parts i and ii). You work for a US company that is due to receive £250 million in June (you are a US exporter). You, as a treasurer of the company, have decided to use currency futures to hedge the currency exposure risk of this transaction. FT Extract CURRENCY FUTURES Feb 21 €-Sterling* €-Yen* $-Can $ t $-Euro € + $-Euro € + $-Sw Franc Open Sett Mar 0.7577 0.7561 Mar 158.99 158.50 Mar 0.9871 0.9886 Mar 1.4707 1.4809 +0.0102 1.4658 1.4758 +0.0101 Jun Mar +0.0086 0.9099 0.9188 0.9270 0.9328 +0.0066 Mar Jun 0.9318 0.9378 $-Sterling + Jun 1.9385 1.9588 $-Aust $t Mar 0.9170 $-Mex Peso Mar 92575 $-Yen t $-Yen t i. Change High -0.0022 0.7578 -0.20 159.06 +0.0013 0.9930 1.4830 1.4777 0.9208 0.9177 92425 ii. 0.9350 +0.0067 0.9398 +0.0186 1.9618 +0.0017 0.9185 92675 Est. vol Low 0.7544 81 158.70 770 0.9856 49,780 1.4694 177,173 1.4645 681 0.9065 70,032 0.9246 139,596 0.9299 455 1.9385 96,949 Open int 9,618 11,369 85,628 201,842 7,047 65,235 Sources: NYBOT; Sterling €100,000 and Yen: €100,000. †CME: Australian $: A$100,000, Canadian $: C$100,000, Euro: €125,000; Mexican Peso: 500,000, Swiss Franc: SFr125,000; Yen: ¥12,5m ($ per ¥100); Sterling; £62,500. CME volume, high & low for pit & electronic trading at settlement. Contracts shown are based on the volumes traded in 2004. 209,752 28,752 94,194 88,438 0.9143 34,035 92250 21,158 137,661 Using the information content is FT Extract above set out the hedge. Assume that you will receive £250 million on the same day as the une futures contracts mature. The exchange has a total spread of $0.04 on the average quote. Estimate the cash flows in June if the actual exchange rate and the future price is $1.99/£1 on the day you receive the £250 million and close your futures position. 16- ral

Answer rating: 100% (QA)

i we would take short position in pound futures for the June month Th... View the full answer