Mondelez, a US food and beverage company, is expected to receive CHF1,500,000 in 3 months' time for foodservice products from Nestle in Switzerland. The following information is available:

 

Spot exchange rate	USD0.98/CHF
3-month forward exchange rate	USD1.07/CHF
USD interest rate	1.75% p.a.
CHF interest rate	1.25% p.a.

 

There are call and put options available on the pound with a strike price of USD1.06/CHF and USD1.12/CHF, respectively. The call and put options are selling for a premium of 2.85 U.S. Dollar (USD) cents and 3.25 cents per Swiss Franc (CHF), respectively.

 What is the minimum dollar receivable if Mondelez hedges? 

Answer rating: 100% (QA)

To hedge against the foreign exchange risk Mondelez can either use a forward contract or options In ... View the full answer