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Describe in words the hedging strategy

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Question 1: Describe in words the hedging strategy that the company should take in each of these cases. Remember that a possible answer is that the company should not be hedging at all.

  1. A Japanese manufacturer would like to hedge against the risk that the Yen will appreciate against the Euro, since the Eurozone is the company's main market.
  2. A US company needs to make a one-time payment of 50 million dollars in Mexican Pesos in about 6 months, and would like to hedge against the risk that exchange rates may change.
  3. A US manufacturing firm that produces cars in Mexico to sell in the US and the Eurozone would like to reduce the effect of currency fluctuations on its profits.
  4. A CFO from an oil company believes that oil prices will increase and wants to profit from this increase by investing in futures.

 

Reference no: EM132938106

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