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MGMT 45001
Supply Chain Financing: FX #2 Forecast and Hedging
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Name #1:
Name #2:
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Assume you have an Account Receivable (US$ 10,000,000) due on November 21, 2018 and you wish to maximize the amount of Canadian dollars you can obtain by selling the US dollars. What do you do?
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Assume the noon spot rate on October 17 is also the forward exchange rate that the Bank will offer to buy your US dollars one month forward.
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Q1. Provide a one month forecast (specific rate not a range) of what you think the Canadian dollar will be valued at in relation to the US Dollar, as well as two reasons for this forecast.
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Forecast
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Reason 1
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Reason 2
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Q2. What will be your hedging strategy? You have three choices, pick one.
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Option 1: leave your full position open with no hedging, and plan to sell US dollars at the November21x closing spot rate.
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Option 2: hedge your full position using the one month forward identified above.
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Option 3: hedge half of your full position using the one month forward identified above, and leave the other half of your position open with no hedging and sell this half of the position at the November 21 closing spot rate.
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Z_Xiao
MGMT45001FX2.docx
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