• This group assignment should be submitted in groups of at least 3 but not more than 4 students. Individual submissions will not be accepted.
• Using ink, every student who belongs to the group must write their name and ID# in the specified fields below (for electronic submissions, you may type your name and ID number).
• The assignment is composed of several long-answer problems, each with several sub-questions. You must answer all questions to receive full credit.
• The assignment must be turned in by e-mail before 11:59pm on October 5. Please send your answers electronically (in Word format or as a PDF file) to twalker@jmsb.concordia.ca.
• To receive full credit, you must show all your calculations and must explain why you perform them.
• You may use a spreadsheet program such as Excel to perform some of the calculations for this assignment. Please do not attach any computer printouts to this assignment, however. If you do use a spreadsheet program, please copy all your results in your write-up. Spreadsheets or any other attachments will not be graded.
Submitting Students:
Name (Last, First) Student ID
Suppose you are the risk manager of a Swiss beer exporter that regularly sells in the United States. The mission of your department is to minimize currency exposure, using currency futures and currency options.
On the 19th of September, 2012, you receive a purchase order for 10,000 barrels of beer from a U.S. wholesaler at a wholesale price of US$18.75 per barrel. The U.S. wholesaler agrees to pay on the 29th of October, 2012.
a) What type of risk(s) does this sale create for your company? Draw a graph that depicts your exchange rate exposure in the spot market.
b) How would you use currency futures to hedge the currency risk? Be specific about the
