What exchange rate risk does alcoa face in this transaction

Assignment Help Financial Management

Reference no: EM131305195

Suppose that the U.S. firm Alcoa sells $2 million worth of aluminum to a British firm. If the exchange rate is currently $1.50 = £1 and the British firm will pay Alcoa £1,333,333.33 in 90 days, answer the following questions.

a. What exchange-rate risk does Alcoa face in this transaction?

b. What alternatives does Alcoa have to hedge this exchange-rate risk?

c. Give a specific example of how Alcoa could hedge this exchange-rate risk.

Reference no: EM131305195

Questions Cloud

What is exchange rate risk : How might an investor use forward, futures, and options contracts to speculate on the future value of a currency?

Discuss about the applied plan for program design : Choose one of the following scenarios and write a comprehensive plan for program design and evaluation You are being asked to apply what you have learned about how Evidence-Based Program Planning applies to organization-wide behavior interventions..

How were the banks expecting to make a profit by buying puts : What is a "bearish call"?- What is a put?- How were the banks expecting to make a profit by buying puts?- What is a "bearish bet"?

How can you improve your personal listening skills : In a 250-300 word response, answer the following question: Do you believe most people are poor listeners or good listeners? What can organizations do to improve listening skills of employees? How can you improve your personal listening skills?

What exchange rate risk does alcoa face in this transaction : What exchange-rate risk does Alcoa face in this transaction?- What alternatives does Alcoa have to hedge this exchange-rate risk?

Investigate performance of an algroithm for preparing images : CS3330: Image and Video Processing. In this assignment, you will design and investigate the performance of an algroithm for preparing images for OCR. You will apply this algorithm in an application context of your choice. You will be required to: ..

What exchange rate risk does daimler face : What exchange-rate risk does Daimler face?- What alternatives does Daimler have to hedge this exchange-rate risk?

Determine the service-related variance for surgical volume : Determine the service-related variance for Surgical Volume. Determine service-related variance for Patient Days. Prepare a flexible budget estimate. Present side-by-side budget, flexible budget estimate, and the actual Surgical Revenues.

Which method is halliburton likely to prefer : If Halliburton enters a forward contract, agreeing to buy ¥250 million in one year at an exchange rate of ¥98 = $1, how many dollars does it need today if it plans to invest the dollars at the U.S. interest rate of 6%?

User Account

All Pages