Determine the outcome of a futures hedge

Reference no: EM132208264

Question - On March 15, 2018, an American firm decided to close out its account at a Canadian bank on June 15, 2018. The firm is expected to have $10 million Canadian dollars in the account at the time of the withdrawal. It would convert the funds to U.S. dollars and transfer them to a New York bank. The relevant spot foreign exchange rate was $0.7736. The June Canadian dollar futures contract was priced at $0.7717. Determine the outcome of a futures hedge if on June 15, 2018 the spot rate was $0.7536 and the futures rate was $0.7550. All prices are in U.S. dollars per Canadian dollar. The Canadian dollar futures contract covers CD100,000.

Reference no: EM132208264

Questions Cloud

Describe the fundamentals of organizational behavior : The CEO has hired you as an external organizational development consultant to help him identify problem areas and to understand.

What is the two-part tariff it charges : If the demand curve represents the demand for an individual consumer, if the monopolist can engage in first-degree price discrimination.

Describe who the police officer would need to collaborate : JUS 101 : How does the ability to conduct legal searches differ between the police officer, probation officer, and prison guard in the performance of their dut

Define pros and cons of employing differentiation strategy : What are the pros and cons of employing a differentiation strategy in a monopolistically competitive market? Cite some of the different ways a firm can try.

Determine the outcome of a futures hedge : The June Canadian dollar futures contract was priced at $0.7717. Determine the outcome of a futures hedge

Explain impacts of increase or decrease in supply of money : Explain the impacts of increase or decrease in the supply of money on all aspects in the economy? As inflation is closely linked to the supply of money.

Calculate the price of a coupon bond : Calculate the price of a 5.7 percent coupon bond with 15 years left to maturity and a market interest rate of 9.0 percent

Calculate the coefficient of determination : Calculate the Coefficient of Determination, r2. Based upon your calculation, do you believe your model is a good model? Show your work and explain.

What is levered value of go-blue and the value of the equity : Go-Blue Systems Inc. has perpetual cash EBIT of $300 mil per year. What is the levered value of Go-Blue and the value of the equity

User Account

All Pages