Determine the overall profit from the transaction

Assignment Help Financial Management

Reference no: EM131325725

You plan to buy 1,000 shares of Swiss International Airlines stock. The current price is SF950. The current exchange rate is $0.7254/SF. You are interested in speculating on the stock but do not wish to assume any currency risk. You plan to hold the position for six months. The appropriate futures contract currently is trading at $0.7250.

Construct a hedge and evaluate how your investment will do if in six months the stock is at SF926.50, the spot exchange rate is $0.7301, and the futures price is $0.7295. The Swiss franc futures contract size is SF125,000.

Determine the overall profit from the transaction. Then break down the profit into the amount earned solely from the performance of the stock, the loss or gain from the currency change while holding the stock, and the loss or gain on the futures transaction.

Reference no: EM131325725

Questions Cloud

Explain the concepts of democracy and constitutionalism : Explain the concepts of democracy, constitutionalism, and the free market system. How are these three systems designed to work together to maintain a balance of power in the United States? Do they actually maintain a balance of power? Why or why n..

Define each of the four essential elements of a contract : Read through the brief case that follows and determine whether a contract exists. If all of the essential elements are present, then a contract exists. If one or more of these elements is missing, then a contract has not been formed.Identify and d..

Evaluate the morality of punishment for actions : Evaluate the morality of punishment for actions; Describe the philosophical theories that justify punishment as a requirement to creating and reinforcing moral behavior

Prepare a review paper after watching the video : Identify the title, writer, director, major actors, and the year.Summarize the story and plot. How did this aesthetic choice contribute to the general effect on the audience?How are elements like character development or foreshadowing impacted by th..

Determine the overall profit from the transaction : Construct a hedge and evaluate how your investment will do if in six months the stock is at SF926.50, the spot exchange rate is $0.7301, and the futures price is $0.7295.

Which roles are the most important why : Review the roles and functions outlined in your text, and respond to the following: Which roles are the most important? Why? Which roles are the least important? Does the working environment (prison, probation and parole, community) have an impact o..

Create a presentation explaining what civil liberties are : Create a PowerPoint slide show explaining what Civil Liberties and Civil Rights are. Your slide show should consist of 10-14 slides (not including a title slide and reference slide which you must have).

Potential candidates for a hr management position : Create a list of three best practices recruiters should use when screening potential candidates for a HR management position. Justify your selections.

What you think might be a bull spread with t bonds futures : Describe what you think might be a bull spread with T-bonds futures. Of course, be sure to explain your reasoning.

User Account

All Pages