PT Gas Co is a large multinational company in the UK with a number of...
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Accounting
PT Gas Co is a large multinational company in the UK with a number of subsidiary companies around the world. One of the subsidiary is Laxamana Co which is based in US. PT Gas Co is owing to Laxamana Co amounted to US$2.4 million. PT Gas Co want to hedge against the USD strengthening against the because if the depreciates against the USD, then the PT Gas Co has to spend more to buy the USD later at the end of 3 months.
Other information available are:
1. Current exchange rate (US$/1): Spot 5962
3-month futures 1.6037
2. Contract size 62,500
3. In 90 days time the spot is 1.6213 $/
4. Assume that the basis is zero at the maturity of the futures contract
Prepare your answers in an infographic format for the following
Explain on how to mitigate the risk using currency futures and currency options.
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