Sports Exports
Description
Use of Currency Futures and Options by the Sports Exports Company
The Sports Exports Company receives British pounds
each month as payment for the footballs that it exports.
It anticipates that the pound will depreciate over time
against the U.S. dollar.
- How can the Sports Exports Company use currency
futures contracts to hedge against exchange rate
risk? Are there any limitations of using currency
futures contracts that would prevent the Sports Exports
Company from locking in a specific exchange rate at
which it can sell all the pounds it expects to receive in
each of the upcoming months? - How can the Sports Exports Company use currency
options to hedge against exchange rate risk? - Are there any limitations of using currency options
contracts that would prevent the Sports Exports Company
from locking in a specific exchange rate at which it can sell all the pounds it expects to receive in each of
the upcoming months? - Jim Logan, owner of the Sports Exports Company,
is concerned that the pound may depreciate substantially
over the next month, but he also believes that the
pound could appreciate substantially if specific situations
occur. Should Logan use currency futures or
currency options to hedge the exchange rate risk? Is
there any disadvantage of selecting this method for
hedging?
The website of the Chicago Mercantile Exchange
(www.cmegroup.com) provides information about currency
futures and options.
- Use this website to review the prevailing prices of
currency futures contracts. Do todayâs futures prices
(for contracts with the closest settlement date) generally
reflect an increase or decrease from the day before?
Is there any news today that might explain the change
in the futures prices? - Does it appear that futures prices among currencies
(for the closest settlement date) are changing in the
same direction? Explain. - If you purchase a British pound futures contract
with the closest settlement date, what is the futures
price? Given that a contract is based on £62,500, what
is the dollar amount you will need at the settlement
date to fulfill the contract? - Go to www.nasdaqtrader.com and under âTrading
Products,â click on FX Options. Obtain the money
currency option quotations for the Canadian dollar
(the symbol is XCD) and the euro (symbol is XEU) for
a similar expiration date. Which currency option has a
larger premium? Explain your results.
Sample Solution
The life of a celebrity compared to an average personâs life is very different. A rich person lives a more luxuries lifestyle than the average person does. The average person usually only owns a single home where as someone of wealth may o Sports Exports wn several homes. The normal person is not as fortunate as someone who is rich and can sometimes be envious of what the elite own. The average salary for a middle class family is $60,000 to $85,000 the minimum amount of money you need to live a comfortable lifestyle these days is around $50,000. In order to be considered wealthy it is over a million dollars and with that amount of money you can buy almost anything you want and never have to work again, that is if you are careful with your finances. A rich celebrity on television usually owns a couple of luxurious homes all Sports Exports over the world thatâs why we get excited watching them on television and showing all that they own. We, as the viewers, are interested to see what the rich have spent their money on. While we are also jeal>
The life of a celebrity compared to an average personâs life is very different. A rich person lives a more luxuries lifestyle than the average person does. The average person usually only owns a single home where as someone of wealth may own several homes. The normal person is not as fortunate as someone who is rich and can sometimes be envious of what the elite own. The average salary for a middle class family is $60,000 to $85,000 the minimum a Sports Exports mount of money you need to live a comfortable lifestyle these days is around $50,000. In order to be considered wealthy it is over a million dollars and with that amount of money you can buy almost anything you want and never have to work again, that is if you are careful with your finances. A rich celebrity on television usually owns a couple of luxurious homes a Sports Exports ll over the world thatâs why we get excited watching them on television and showing all that they own. We, as the viewers, are interested to see what the rich have spent their money on. While we are also jeal>
Is this question part of your Assignment?
We can help
Our aim is to help you get A+ grades on your Coursework.
We handle assignments in a multiplicity of subject areas including Admission Essays, General Essays, Case Studies, Coursework, Dissertations, Editing, Research Papers, and Research proposals
Header Button Label: Get Started NowGet Started Header Button Label: View writing samplesView writing samples