Your firm is an italian importer of bicycles you have

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21Your firm is an Italian importer of bicycles. You have placed an order with a British firm for £1,000,000 worth of bicycles. Payment (in pounds sterling) is due in 12 months. Detail a strategy using futures contracts that will hedge your exchange rate risk. Have an estimate of how many contracts of what type and maturity.ContractSizeU.S. $ equiv.Currency per U.S. $CountryTuesdayMondayTuesdayMonday£10,000Britain (Pound) $1.9600$1.9400£0.5102£0.51551 Month Forward$1.9700$1.9500£0.5076£0.51283 Months Forward$1.9800$1.9600£0.5051£0.51026 Months Forward$1.9900$1.9700£0.5025£0.507612 Months Forward$2.0000$1.9800£0.5000£0.5051€ 10,000Euro $1.5600$1.5400€ 0.6410€ 0.64941 Month Forward$1.5700$1.5500€ 0.6369€ 0.64523 Months Forward$1.5800$1.5600€ 0.6329€ 0.64106 Months Forward$1.5900$1.5700€ 0.6289€ 0.636912 Months Forward$1.6000$1.5800€ 0.6250€ 0.6329SFr. 10,000Swiss Franc $0.9200$0.9000SFr. 1.0870SFr. 1.11111 Month Forward$0.9400$0.9200SFr. 1.0638SFr. 1.08703 Months Forward$0.9600$0.9400SFr. 1.0417SFr. 1.06386 Months Forward$0.9800$0.9600SFr. 1.0204SFr. 1.041712 Months Forward$1.0000$0.9800SFr. 1.0000SFr. 1.0204a)Go long 100 12-month pound futures contracts; and long 125 12-month euro futures contracts b)Go short 100 12-month pound futures contracts; and short 125 12-month euro futures contracts c)Go long 100 12-month pound futures contracts; and short 125 12-month euro futures contracts d)Go short 100 12-month pound futures contracts; and long 125 12-month euro futures contracts.e)None of the above
22Your firm is a U.K.-based exporter of bicycles. You have sold an order to a Swiss firm for SFr. 1,000,000 worth of bicycles. Payment from the Swiss firm (in Swiss francs) is due in 12 months. Detail a strategy using futures contracts that will hedge your exchange rate risk. Have an estimate of how many contracts of what type and maturity.ContractSizeU.S. $ equiv.Currency per U.S. $CountryTuesdayMondayTuesdayMonday£10,000Britain (Pound) $1.9600$1.9400£0.5102£0.51551 Month Forward$1.9700$1.9500£0.5076£0.51283 Months Forward$1.9800$1.9600£0.5051£0.51026 Months Forward$1.9900$1.9700£0.5025£0.507612 Months Forward$2.0000$1.9800£0.5000£0.5051€ 10,000Euro $1.5600$1.5400€ 0.6410€ 0.64941 Month Forward$1.5700$1.5500€ 0.6369€ 0.6452
3 Months Forward$1.5800$1.5600€ 0.6329€ 0.64106 Months Forward$1.5900$1.5700€ 0.6289€ 0.636912 Months Forward$1.6000$1.5800€ 0.6250€ 0.6329SFr. 10,000Swiss Franc $0.9200$0.9000SFr. 1.0870SFr. 1.11111 Month Forward$0.9400$0.9200SFr. 1.0638SFr. 1.08703 Months Forward$0.9600$0.9400SFr. 1.0417SFr. 1.06386 Months Forward$0.9800$0.9600SFr. 1.0204SFr. 1.041712 Months Forward$1.0000$0.9800SFr. 1.0000SFr. 1.0204a)Go short 100 12-month Swiss franc futures contracts; and long 50 12-month pound futures contracts.b)Go long 100 12-month Swiss franc futures contracts; and short 50 12-month pound futures contracts.c)Go short 100 12-month Swiss franc futures contracts; and short 50 12-month pound futures contracts.d)Go long 100 12-month Swiss franc futures contracts; and long 50 12-month pound futures contracts.e)None of the above

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