How would cotton bolls hedge the transactions with shekel

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Suppose Cotton Bolls, Inc. does business with companies in Israel and Singa- pore. Cotton Bolls expects to pay 500,000 Israeli shekels and receive 125,000 Singapore dollars on the Friday before the third Wednesday of April. Forward rates for that date are FT$/shekel = $0.1625/shekel and FT$/S$ = $0.65/S$.

a. Show time lines illustrating each transaction.

b. How would Cotton Bolls hedge these transactions with $/shekel and $/S$ futures contracts?

c. Suppose the forward rate is S$0.2500/shekel. Describe a cross hedge that would accomplish the same objective as the two hedges in part b.

Reference no: EM13871888

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