Explain and discuss the hedging strategies using futures, Financial Management

Assignment Help:

Question:

(a) Explain and discuss the hedging strategies using futures

(b) Boeing (an American company) delivered on 1st September 2008 an airplane to a Canadian company. Boeing will receive payment of 4 million Canadian dollars in 2 months time that is on 1st November 2008. Fearing a depreciation of Canadian dollars Boeing decides to buy European puts at the price of 2.85 cents/CAD and the strike price is $0.93. The spot price on the 1st of September 2008 is $0.9280/CAD.

(i) Describe how this strategy will allow Boeing to hedge against the depreciation of the Canadian dollar.

(ii) If the spot rate on the 1st November 2008 is $0.8520/CAD, discuss whether Boeing has benefitted from taking position in the options and calculate the benefits/losses.

(iii) Show the hedging strategies involving options if a company who has debts in a currency is anticipating an appreciation of the currency.


Related Discussions:- Explain and discuss the hedging strategies using futures

Companies that would be best able to handle high debt levels, Give two exam...

Give two examples of types of companies that would be best able to handle high debt levels. Companies that manage local telephone service and those that manage natural gas deli

Determine the cost of capital in emerging nation, How can we measure a comp...

How can we measure a company's cost of capital in emerging nations, especially when there is no state bond which we could take as a reference? Although there is no state bond w

Determine the example of future value of an annuity, Determine the example ...

Determine the example of Future Value of an Annuity An annual payment of 7000 $ is invested at 5% per annum compounded yearly. What will be the amount after 20 years? Solut

Demand and supply shocks, Demand and Supply Shocks The influence of the...

Demand and Supply Shocks The influence of the above macroeconomic factors on the economic performance can be analyzed by classifying their impact on the economy as a supply or

Briefly define liquidity risk faced by a bank, Question: You have just ...

Question: You have just been appointed the secretary of the ALM Committee (ALCO) of ABN Bank. The ALCO members have some queries relating to the liquidity risk faced by the ban

Nature of working capital, Nature of Working Capital: Working Capital ...

Nature of Working Capital: Working Capital Management is concerned with the problems that arise in attempting to organize the Current Assets, the inter-relationship and Curren

Caselet, 1.How would you judge the potential profit of Bajaj Electronics on...

1.How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth Plastics and give your views to increase the profit? 2. Suggestion regarding C

Estimate the montly deposite, Mr. Moore will be 35 years at the end of the ...

Mr. Moore will be 35 years at the end of the month and he wishes to retire in 25 years. He plans to invest in a mutual fund earning 7.5 percent annual return compounded monthly an

Can you explain about overdrafts, Q. Can you explain about Overdrafts? ...

Q. Can you explain about Overdrafts? Overdraft means an agreement with a bank by which a current account-holder is allowed to withdraw more than the balance to his credit up to

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd