International Business: The Challenges of Globalization (8th Edition)
8th Edition
ISBN: 9780133866247
Author: John J. Wild, Kenneth L. Wild
Publisher: PEARSON
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Question
Chapter 13.2, Problem 1QS2
Summary Introduction
To Determine:
The risk of export and import for the exporters
Introduction:
Exports are the goods or services produced in one country and purchased by the citizen of another country. While imports are the goods and services produced in a different country and purchased in own country.
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You ordered 1,000 tons of cocoa beans, which will be delivered to your chocolate manufacturing plant in PA in March next year. The current price of cocoa beans, as of today, is $2,260 per ton.
There is an investor company who currently offers two types of risk hedging contracts:
-Forward contract: $2,400 per ton at a fixed cost of $30,000.
-Futures contract: $2,400 per ton at a cost of $50 per ton (therefore, the up-front cost is 1000 tons * $50 per ton = $50,000)
Assume that the price of cocoa beans went down to $2,200 per ton in March 2023. How much would you need to pay for 1,000 tons of cocoa beans under the futures contract?
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International Business: The Challenges of Globalization (8th Edition)
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