Max Ltd is due to receive $810,000 from a US company in 30 days time. It is

Fantastic news! We've Found the answer you've been seeking!

Question:

Max Ltd is due to receive $810,000 from a US company in 30 days time. It is now September 30^th. Max wishes to hedge exchange rate risk using currency futures.

Current spot rate is $1.5028/£

(CME £62,500), Futures contracts are currently available with the following rates:

December $1.5087

March $1.5098

June $1.5123

Assume the futures contracts mature at the end of the relevant month.

Evaluate the hedge if in 30 days, the spot rate (October 30^th) is $1.6703 and the Future price (October 30^th) for December contract is $1.6744
Explain why currency future contracts have not provided a perfect hedge.

Posted Date: Nov 29, 2021 12:01 PM

See More Questions

A firm in the United States is due to receive payment of 1 million in eight years time. It would like to protect itself against a decline in the value of the euro, but finds it difficult to get...
Required a. S&S Ltd is due to receive 6,000,000 in 3 months' time from a customer for the United Kingdom. Advice the management of S&S Ltd, the possible outcome of using the forward contract to...
Currency spot exchange rates are widely available on the Web. For example, at Yahoo! Finance (finance.yahoo.com/currency) you can find the exchange rates between more than 150 currencies. The...
An analyst expects that 20% of all publicly traded companies will experience a decline in earnings next year. The analyst has developed a ratio to help forecast this decline. If the company is headed...
(a) Plot the data on lightning deaths. (b) Describe the trend (if any) and discuss possible causes. (c) Fit an exponential trend to the data. Interpret the fitted equation. (d) Make a fore- cast for...
Refer to Exhibit 2-11 on page 65. Required a. What is Universal Sports Exchange's operating profit equation? b. If Universal Sports Exchange sells 55,000 jerseys, what total expense will be reported...
You are considering an investment in a tree farm. Trees grow each year by the following factors: The price of lumber follows a binomial lattice with $u=1.20$ and $d=9$. The interest rate is...
Bayside Coatings Company purchased waterproofing equipment on January 2, 20Y4, for $190,000. The equipment was expected to have a useful life of four years and a residual value of $9,000. Instruction...
Rearrange the code blocks below to build a proper elif statement. Drag from here if my_var 5: elif my_var
King's Landing is a large amusement theme park located in Virginia. The park hires high school and college students to work during the summer months of May, June, July, August, and September. The...
Review of Environmental Biotechnology for Bioconversion of Agricultural and Forestry Wastes into Nutritive Biomass Marian Petre and Violeta Petre http://dx.doi.org/10.5772/55204
Pickle Corporation issued nonvoting preferred stock with a fair market value of $4,000,000 in exchange for all the outstanding common stock of Sickle Corporation. On the date of the exchange, Sickle...
Some automobiles have five-button locks. To gain entry, push each of the five buttons, in a particular order, to unlock the door. How many different five-digit sequences are possible?
Consider the following systems: Which of these systems can be modelled by the differential equation of form \[ a_{2} \frac{d^{2} y(t)}{d t^{2}}+a_{1} \frac{d y(t)}{d t}+a_{0} y(t)=x(t) \] (a) 1 and 2...
Match List-I (Physical action or activity) with List-II (Category of system) and select the correct answer using the codes given below the Lists: (a) (b) (c) (d) List I A. Human respiration system B....
A contest offers the winner $\$ 50,000$ now or $\$ 10,000$ now and $\$ 45,000$ in one year. Which is the better choice if the current interest rate is $2 \%$ compounded monthly and the winner...
The scenario is this Beverlys_Best_Baked_Breads_Order_App has one location, it's a small shop doing well. They need someone to produce an order app that allows customers to put in tickets for bread....
Show that if A is any m n matrix, then Im A = A and AIn = A.
In the case of the previous question, if the effect of the finite speed of sound were neglected, would $h$ be larger or smaller? What percentage error would be made? Previous question: One wants to...
The following scalar field is given: $V(x, y, z)=2 x^{2}+x y z+y$. Verify that Schwarz's theorem is satisfied. Schwarz's theorem: Mention should now be made of an important theorem of Mathematical...
In 2023, an article in the Wall Street Journal noted that many employers say they had to raise wages last year to recruit and hold on to restaurant servers, hotel housekeepers, and retail store...

Max Ltd is due to receive $810,000 from a US company in 30 days time. It is

Question:

Expert Answer:

Assess the support if in 30 days the spot rate October 30th is 16703 and the Future value October 30th for the December contract is 16744 Max Ltd UK organization has an openness of 810000 receivable i... View the full answer

Students also viewed these banking questions