Access the Chicago Mercantile Exchange website (www.cme.com) or any financial website to obtain the going price for the current Euro currency futures contracts. As an international finance manager, you are asked to perform the following tasks:
Hedge the firm’s payables–Your firm has to send 500,000 Euros to Germany in the next three months to pay for the goods it purchased last month. What should you do to make sure your firm does not have to pay more than it owes due to the Euro’s possible adverse move?
Hedge the firm’s receivables–Your firm exported 20 containers of rice to a Middle Eastern country last week. You are expected to get paid 1,000,000 Euros in the next three months. What should you do to hedge the firm’s receivable against an unfavorable Euro price fluctuation?
Speculate on a currency (e.g., Euro) future move for profit. Decide if you should buy (go long) or sell short (go short) the currency. Justify your decision based on five influencing factors covered in Chapter 4. Furthermore, demonstrate how you can utilize currency options to protect your position. Finally, determine your potential profit or loss if the currency moves away 100 PIPs from your entry price.
Write a paper to include the above three scenarios. Your paper should be between 2-3 pages, not including a reference page. Include appropriate citations and references in APA format. The paper does not need an abstract and should be double-spaced, font size 12, and should include at least three valid sources. Write in a Word document
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