A Practical Case Study in Hedging

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Using a case study supplied by the student a series of financial questions are answered. The first three questions examine the way hedging may be used by a firm that requires 1 million pounds of copper twice a year and calculates the outcome of hedging across four periods as well as examining the potential need for a marginal call to be made. The second section looks at a loan, with options to cap or not to cap, and using the figures given to calculate the internal rate of return. All calculations are shown. The bibliography cites five sources.