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What will be the outcome of the hedges

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Reference no: EM133022296

Question - A company expects to receive the following two payments from their client in China.

January 6, 2021 ¥1,000,000.00

April 6, 2021 ¥1,000,000.00

Given the follow data, answer the following questions.

Spot rate today (October 6, 2020) $0.1455

Jan 6, 2021 Futures $0.1440

Apr 6, 2021 Futures $0.1430

a) Should the company be worried of the dollar depreciating or appreciating?

b) How should the company hedge the two receivables using futures?

c) What will be the outcome of the hedges if the spot rate on expiration is the following? Show all work.

Spot rate on Jan 6, 2021= $0.1550

Spot rate on Apr 6, 2021= $0.1425

d) Explain margin requirements and maintenance margin when trading futures contracts.

Reference no: EM133022296

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