Secret Spices, a European company, sold secret ingredients to Coca-Cola, a well-known US multinational company, and billed $30 million payable in six months. Secret Spices is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $1.05/ and six-month forward exchange rate is $1.10/ at the moment. Secret Spices can buy a six-month put option on US dollars with a strike price of 0.95/$ for a premium of 0.02 per US dollar. Currently, six-month interest rate is 2.5% in the euro zone and 3.0% in the U.S. Note: . The transaction in this assignment is hypothetical.

1. Coca-Cola derives about three-quarters of its revenue from overseas markets. Investigate the company's exchange risk management policies and practices from its annual report (10-K) filed with the Securities and Exchange Commission (SEC) of the United States. The annual report is available from the following website: www.sec.gov.degar.shtml. Summarize Coca-Cola's approach to exchange risk management.

Answer rating: 100% (QA)

Based on my research The CocaCola Company manages foreign currency exchange rate risks effectively utilizing derivatives and strategic hedging techniq... View the full answer