Provide the hedging strategy

Assignment Help Financial Accounting

Reference no: EM132977862

Question: Assume Apple Inc. is expected to receive revenue from the sale of phones in the euro area worth €6,860,000,000. Given the current environment due to the impact of COVID-19, Apple fears that the revenue will be adversely affected upon converting to US$ in the next three months. Therefore, Apple Inc. wishes to hedge to reduce its risk. Based on this scenario, please answer the following questions:

(a) Please explain ONE financial risk faced by Apple Inc. related to the revenue received in Euro, given the above scenario, why you consider this as a risk, and whether you would consider hedging. In your answer, please discuss the outlook for the underlying variable and cite evidence of an adverse or favourable direction. You need to provide sufficient evidence of research to support your arguments. NB: reference list will not be part of the word count.

(b) For the risk you have mentioned above in part (a) please provide the hedging strategy you will use and explain why you have chosen this strategy above all others

(c) Irrespective of your answer above, assume you are using an option 'combination' strategy to hedge your risk. Please use real data from the CME group and provide the net premium cost of the hedge, the strike prices used, and the number of contracts required. Please show all calculations.

Reference no: EM132977862

Questions Cloud

What do feel an auditor would most be concerned with : What do you feel an auditor would most be concerned with during an IT audit? Lastly, discuss suggestions for integrating COSO framework compliance

Calculate the amount of cash settlement and investor : Calculate the amount of cash settlement and investor uses continuous rates for discounting cash flows

Describe the central processing unit and the hard drive : Describe the Central Processing Unit and the hard drive. What is a software? Name the the computer peripherals, and explain 3 of them.

Will consumers needs be different from enterprises : Who owns the data that is being served from the reputation service? In addition, what kinds of protections might a customer expect from other customers?

Provide the hedging strategy : Provide the hedging strategy you will use and explain why you have chosen this strategy above all others - provide sufficient evidence of research to support

How risk management in the financial industry could be aided : How risk management in the financial industry could be aided by text mining. Use APA format and Include at least 3 quotes from your sources enclosed

What are the pros and cons of each : Should be a sole proprietorship, a partnership, or a corporation. In your own words what are the pros and cons of each? What would you recommend?

Contrasting multi-threading and parallel processing : Contrasting multi-threading and parallel processing. Use APA format and Include at least 3 quotes from your sources enclosed in quotation marks.

What are some types of technology might encounter : What are some types of technology might you encounter in your chosen field that will use these networking protocols and standards?

User Account

All Pages