What is the hedged value of alcoa receivable

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Reference no: EM132507462

Alcoa Chemical, a US company, has sold £3 million chemicals to CPL Co. Payment is due in 90 days.

Spot rate: $1.63/£ 90-day

forward rate $1.59/£ 90-day

U.S. dollar interest rate (annualized) 3.2% 90-day

Pound interest rate (annualized) 5% 90-day

call option on pound at $1.61/£ premium $0.03 per pound 90-day

put option on pound at $1.61/£ premium $0.04 per pound

  • What is the hedged value of Alcoa's receivable using the forward market hedge? 
  • What is the hedged value of Alcoa's receivable using the money market hedge?
  • Which of the hedging alternatives analyzed would you recommend to Alcoa? Why?

Reference no: EM132507462

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