Reference no: EM132945402
A company expects to receive the following two payments from their client in China.
January 6,2021 ¥1,000,000.00
April 6, 2021 ¥1,000,000.00
Given the follow data, answer the following questions.
Spot rate today (October 6, 2020) $0.1455
Jan 6, 2021 Futures $0.1440
Apr 6, 2021 Futures $0.1430
Problem a) Should the company be worried of the dollar depreciating or appreciating?
Problem b) How should the company hedge the two receivables using futures?
Problem c) What will be the outcome of the hedges if the spot rate on expiration is the following? Show all work.
Spot rate on Jan 6, 2021= $0.1550
Spot rate on Apr 6, 2021= $0.1425
Problem d) Explain margin requirements and maintenance margin when trading futures contracts.