Solution-What is net proceed in dollar

What is net proceed in dollar

Assignment Help Finance Basics

Reference no: EM132731426

A whole-sale import firm expects to pay 5 million Swiss Franc (CHF) in three months for the delivery of branded watches. The current exchange rate is $0.95 per CHF. Three-month futures rate is $0.90 per CHF. The firm would like to lock-in the exchange rate. One futures contract size is CHF 125,000, and one (call or put) currency option contract is CHF 62,500.

(i) If you decide to use futures on CHF, which position (Long or Short) will you take on futures and how many contracts will you need to fully hedge?

(ii) Instead of using futures, you want to enjoy upside potential while protecting from downside risk. Should you buy a PUT option or a CALL option on CHF and how many PUT or CALL contracts will you need to fully hedge? Premium for CALL is $0.004 and premium for PUT is $0.005.

(iii) Using your answer from question (ii), what is your net proceed in dollar (including premium) if the spot rate at the end of 90 days is $0.91/CHF?

(iv) Using your answer from question (ii), what is your net proceed in dollar (including premium) if the spot rate at the end of 90 days is $0.97/CHF?

Reference no: EM132731426

Questions Cloud

Calculate the return on equity : Calculate the return on equity (ROE) given a profit margin of 4.5%, a return on assets of 6.5%, and an equity multiplier of 1.2

Calculate the value of the bond : If each bond has a face value of $1,000 and coupon rate 5.3%, calculate the value of the bond one year later if the yield to maturity is changed

Explain the female reproductive system : The Female Reproductive System: Identify the anatomical structures of the male/female reproductive systems and diagrams should be included as well.

Examine how accounting standards impact financial measures : Develop an ability to identify and assume an assigned role - illustrate the importance of hidden (undirected) issues that arise from a detailed analysis

What is net proceed in dollar : Using your answer from question (ii), what is your net proceed in dollar (including premium) if the spot rate at the end of 90 days is $0.97/CHF?

Compose a brief paper that gives an overview of your company : Select the company you will be researching for your paper. Compose a brief paper that gives an overview of your company. Your summary should include.

Find out the current yield of whitesell athletic corporation : Whitesell Athletic Corporation's bonds have a face value of $1,000 and a 9.5% coupon paid semiannually; the bonds mature in 10 years.

What is the real peso return to the mexican investor : If RPPP holds, what is the real peso return to the Mexican investor over 10 years?

Find 12-month libor rates : The current 12-month USD Libor rate is 0.3% per annum. You run a regression of future percentage spot rate changes (St+1/St -1) on the forward premium

User Account

All Pages

What is net proceed in dollar

Reference no: EM132731426

Reference no: EM132731426

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT