Which hedging technique would you choose

Reference no: EM13300043

You have delivered 100,000 bushels of Red Wheat # 4 to a customer in Amsterdam at a price of 1.923 Euros per bushel. Under the terms of the agreement you will receive payment in Euros in 90 days. The current $/Euro exchange rate is $1.35 per Euro. Eurobor, the rate at which you can borrow/or lend in Euros is 6%. You can purchase/sell forward contracts for Euros for delivery in 90 days at a price of 1.95 Euro's per dollar.

(a) Structure a hedge for your exposure using forwards. What is the effective $/Euro rate that you lock in?

(b) Structure a synthetic forward that would hedge your exposure. What is the effective $/Euro rate that you lock in?

Reference no: EM13300043

Questions Cloud

What is the gauge pressure at that depth : Consider diving 30.0m below the surface of the ocean (density 1.03 grams/cc). what is the gauge pressure at that depth

Which project should the company invest in : The other alternative is the purchase of a supermarket chain, also costing $100 million. It too, has an expected net present value of $20 million. The firms management is interested in reducing the variability of its earnings.

Two mutually exclusive projects : Zellars, Inc. is considering two mutually exclusive projects, A and B. Project A costs $75,000 and is expected to generate $48,000 in year one and $45,000 in year two.

Find at what rate is heat conducted through the coat : A down jacket has a surface area of 0.75 m2 and is filled with a 4.1 cm thick layer of down, At what rate is heat conducted through the coat

Which hedging technique would you choose : Structure a synthetic forward that would hedge your exposure. What is the effective $/Euro rate that you lock in?

Prepare a financial analysis : Prepare a financial analysis report comparing 2 publicly traded corporations.

Calcluate the impulse exerted on the clay ball : The super ball is not replaced by a clay ball the same size and mass. The ball is dropped from the same height and it sticks to the table. Calcluate the impulse exerted on the clay ball

How to calculate the asphalt content by weight of mix : The VMA of a mixture is 15.0% and the air voids are 4.0%.If the aggregate has a specific gravity (bulk dry) of 2.700 g/cm3 and percent binder absorbed (by the mass of aggregate) is 0.5%, calculate the asphalt content by weight of mix.

Fair value accounting for goodwill. : Fair value accounting for goodwill. Under FAS141R, determine the amount of Goodwill that "the acquiring company" enters on its balance sheet in the following situation:

User Account

All Pages