Answer to Question #184922 in Economics for Puja

Question

2.      Assume that you and the BusBoard’s management team decided to hedge using forward contracts. Assume that the expected final sales volume is 2,500. What are your total revenues and the percentage gains/losses from hedging (compared to no hedging)

a) if the exchange rate (bid-ask) remains at $0.76/C$ - $0.78/C$?

b) if the investors consider the U.S. dollar a safe haven currency during the pandemic?

 

3.      Assume that you and the BusBoard’s management team decided to hedge using option contracts. Assuming expected final sales volume is 2,500, what are your total revenues and the percentage gains/losses from hedging (compared to no hedging)

a) if the exchange rate (bid-ask) remains at $0.76/C$ - $0.78/C$?

b) if the investors consider the U.S. dollar a safe haven currency during the pandemic?

Answer 1

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