These are the case question, must be answered
- Why is Cain concerned by the exchange rate fluctuation? Is her position long or short?
- If Can decides to use options would she use a put or a call?
- Calculate the impact of the two hedging strategies and the unhedge positionunder the following three scenarios at the end of January:
- US$ = C$
- US$ = C$0.90
- US$ = CS1.10 (to simplify, ignore difference in time value over the 3-month period.)
- Should Cain hedge her position in US$? Why or why not?
- Which hedge should she use?
- If you chose the option, specify the option price.
The paper should consist a brief description of the case, an explanation of the problem, alternative solutions, your recommendations, including materials, such as spreadsheets, needed to justify your recommendation
Explanation & Answer
Please find the completed workLet me know if you have any concerns. Goodbye.
Running Head: ADDRESSING CURRENCY EXPOSURE
Addressing Currency Exposure
ADDRESSING CURRENCY EXPOSURE
Brief description of the case
The case describes the methods of addressing currency exposure at Pixonix Inc. Pixonix
Inc. was a graphic design. It was based in Toronto, Canada. Pixonix Inc. Licensed proprietary
tools and software through the use of a U.S. Company. Notably, the company utilizes both the
Canadian dollar and the US. dollar. This has an implication that the company has to convert its
Canadian dollar cash flows into U.S dollars. At a time when the Canadian dollar strengthened, it
was to the advantage of Pixonix since this impacted both cash flows and profitability positively.
However, the company was faced with uncertainties concerning the Canadian Dollar and this
negatively affected the decisions that the management needed to make.
Remarkably, there is a time when the Canadian dollar was higher in value than the U.S.
dollar. This was in the early 1970s. It was during the technological boom of the 1990s when the
Canadian Dollar fell in comparison to the U.S. dollar. After that, the value rose due to the
primary oil exports. The Canadian economy also strengthened resulting in the rise in the
Cain, the chief financial off...
24/7 Homework Help
Stuck on a homework question? Our verified tutors can answer all questions, from basic math to advanced rocket science!
Of Mice and Men
by John Steinbeck
The Tipping Point
by Malcolm Gladwell
by Mary Shelley
Too Much and Never Enough
by Mary L. Trump
The Power of Habit - Why We Do What We Do in Life and Business
by Charles Duhigg
As I Lay Dying
by William Faulkner
Sounds Like Titanic
by Jessica Chiccehito Hindman
Rules Of Civility
by Amor Towles