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Madrigal Electromotive US is planning to sell an air-filtered system to the fast food chain Chicken Brothers UK for the expansion of its operation in Europe. The buyer (Chicken Brothers) agreed to pay 105,000,000 pounds one year after signing the contract. Today the spot rate is $1.5930 per pound and the future rate is $1.5915 per pound. Madrigal Electromotive expects in one year a spot rate of $1.5430 and future exchange rate of $1.5415. Knowing that the British pounds future contracts are for 62,500 pounds, explain your strategy for hedging the position of Madrigal Electromotive US against changes in the exchange rate of dollar to pounds.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92774161

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