station company, is due to pay Diamond Shamrock Corp, an American oil refinery and gas a...

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station company, is due to pay Diamond Shamrock Corp, an American oil refinery and gas a Canadian supplier CAD750,000 in three months' time. It is now 15 January 2022 (15/1/2022). Relevant data from the foreign currency and money market is given below: Spot rate One-month forward rate Three-month forward rate Six-month forward rate Canada US Exchange rates quoted today are: Exercise price 0.7900 0.8100 0.8300 USD/CAD = 1.2700 1.2800 USD/CAD = 1.2620 1.2750 USD/CAD 1.2500 1.2670 USD/CAD = 1.2380 - 1.2600 Futures market (CAD62,500 contracts, margins are USD 1,000 per contract) March (3) CAD/USD=0.7900 June (6) September (9) June 2.90 1.60 0.87 Interest rates (p.a.) are: 2% -4% 6% -8% Options market (CAD62,500 contracts, premiums are quoted in cents per CAD) Call option Put option CAD/USD 0.8020 CAD/USD 0.8120 September 3.65 2.35 1.10 June 0.20 1.05 2.10 September 0.32 1.80 2.98 Calculate the dollar payment using each type of hedging technique suggested by the information above and determine the best technique for the company. station company, is due to pay Diamond Shamrock Corp, an American oil refinery and gas a Canadian supplier CAD750,000 in three months' time. It is now 15 January 2022 (15/1/2022). Relevant data from the foreign currency and money market is given below: Spot rate One-month forward rate Three-month forward rate Six-month forward rate Canada US Exchange rates quoted today are: Exercise price 0.7900 0.8100 0.8300 USD/CAD = 1.2700 1.2800 USD/CAD = 1.2620 1.2750 USD/CAD 1.2500 1.2670 USD/CAD = 1.2380 - 1.2600 Futures market (CAD62,500 contracts, margins are USD 1,000 per contract) March (3) CAD/USD=0.7900 June (6) September (9) June 2.90 1.60 0.87 Interest rates (p.a.) are: 2% -4% 6% -8% Options market (CAD62,500 contracts, premiums are quoted in cents per CAD) Call option Put option CAD/USD 0.8020 CAD/USD 0.8120 September 3.65 2.35 1.10 June 0.20 1.05 2.10 September 0.32 1.80 2.98 Calculate the dollar payment using each type of hedging technique suggested by the information above and determine the best technique for the company.

Answer rating: 100% (QA)

To calculate the dollar payment using each hedging technique and determine the best technique for the company well consider the available options forw... View the full answer