Use forward rather than futures currency contracts

Assignment Help Financial Management

Reference no: EM132064021

A German corporation finalized a sale to a Thai client on April 15. The German corporation will deliver some gardening equipment on May 31 and will be paid 345 million baht on June 30. The current spot exchange rate is 40 baht/euro. The German corporation is worried about a depreciation of the baht in the coming two months and wishes to sell those baht forward against euros.

a. Give some reasons why the German corporation should use forward rather than futures currency contracts.

b. Exactly what contract should the German corporation arrange with its bank?

Reference no: EM132064021

Questions Cloud

What is the expected capital gain from the sale of stock : What is the expected capital gain from the sale of this stock at the end of the coming year?

Rates of returns using the various methods outlined in text : What are the rates of returns using the various methods outlined in the text?

What is the contribution of security selection : What is the total return on the portfolio? What is the contribution of security selection?

Strategies of selling currency and buying currency options : What are the differences between the strategies of selling currency forward and buying currency options?

Use forward rather than futures currency contracts : Give some reasons why the German corporation should use forward rather than futures currency contracts.

What would be the return and risk of portfolio invested : What would be the return and risk of a portfolio invested half in the U.S. market and half in the European index?

You buy or sell to hedge the british stock market risk : How many contracts should you buy or sell to hedge the British stock market risk?

Financial analyst collected some data about company : A financial analyst collected some data about a company, which has two sources of financing: debt (25%) and equity (the rest).

What is your expected return at maturity on futures contract : Based on your expectation of a 10% rise in gold price, what is your expected return at maturity on futures contracts?

User Account

All Pages