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Chicago mercantile exchange

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Reference no: EM132410926

1) A Canadian investor holds a US$ Guaranteed Investment Certificate (GIC) which will mature on March 10, 2021 at a value of US $75,000. He intends to cash in the GIC at that time because the bill for his house renovation comes due on March 30, 2021. He is afraid that the USD/CAD exchange rate might move unfavourably between now and then so he wants to fix the rate at which he can covert the US$ GIC proceeds into C$.

He has come to you for assistance so you went to the Chicago Mercantile Exchange (CME) website and found the following:

Canadian Dollar Micro Futures Quotes

Each of the following futures contracts is to buy C$ 10,000 and is quoted as US$ per Canadian Dollar.

Settlement Date        Bid     Ask

Jan 15, 2021               .7853  .7864

Feb 15, 2021              .7956  .7968

Mar 15, 2021              .7988  .7999

Apr 15, 2021              .8034  .8040

i. Is he afraid that the C$ will strengthen or weaken against the US$ between now and March 2021?

ii. Should he be buying or selling the C$ micro futures contracts and how many?

iii. For which  maturity month?

iv. What will his exchange rate be and what will be the total USD price he will pay upon maturity of the contract(s)? 

v. Will he have any unsold USD left over after the above futures transaction and if so, what could he do to hedge the C$ conversion price of any left over US$?

Reference no: EM132410926

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