Seller of the boat can hedge the above contract

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Reference no: EM131933897

You are buying a boat from a company that builds custom boats. You would like a boat priced at $60,000 for delivery June 15, 2018. As the company you are buying from operates from an offshore island location, they prefer all payments be in Bitcoin. You negotiate a deal with the company to buy the boat for $6,000 in cash today as a downpayment and a payment of 5 Bitcoins in June 2018 when the boat is delivered.

(a) Explain the currency risk you are taking with this contract

(b) Describe (in general) 2 ways of hedging the risk in the transaction above. (Note you can assume standard derivative contracts are available).

Reference no: EM131933897

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