尉所港汾蜀号上学 国际财务管理 微型案例 Capital Crystal Inc.Using Currency Futures and Options Capital Crystal Inc.is a major importer of Crystal from Germany.The crystal is sold to prestigious retail stores throughout the U.S.The imports are denominated in German marks (DM).Every quarter,Capital needs DM 500 million.It is presently attempting to determine whether it should use currency futures or currency options to hedge imports three months from now.If it will hedge at all. The spot rate of the mark is $.60.A three-month futures contract on the mark is available for $.59 per unit.A call option on the mark is available with a three-month expiration date and an exercise price of $.60.The premium to be paid on the call option is $.01 per unit. Capital is very confident that the value of the mark will rise to at least $.62 in three months.It has been very accurate in its previous forecasts of the mark's value.The management style of Capital is very risk-averse.Managers receive a bonus at the end of the year if they satisfy minimal performance standards.The bonus is fixed,regardless of how high above the minimum level one's performance is.If performance is below the minimum,there is no bonus,and future advancement within the company is unlikely. a)As a financial manager of Capital,you have been assigned the task of choosing among three possible strategies:(1)hedge the DM position by purchasing futures,(2)hedge the DM position by purchasing call options,or(3) do not hedge.Offer your recommendation and justify it. b)Assume the previous information that was provided,except for this difference: Capital has revised its forecast of the mark to be worth $.57 three months from now.Given this revision,recommend whether Capital should (1)hedge the DM position by purchasing futures,(2)hedge the DM position by purchasing call options,or(3)not hedge.Justify your recommendation.Is your recommendation consistent with maximizing shareholder wealth? -1-国际财务管理 微型案例 - 1 - Capital Crystal Inc. — Using Currency Futures and Options Capital Crystal Inc. is a major importer of Crystal from Germany. The crystal is sold to prestigious retail stores throughout the U.S. The imports are denominated in German marks (DM). Every quarter, Capital needs DM 500 million. It is presently attempting to determine whether it should use currency futures or currency options to hedge imports three months from now. If it will hedge at all. The spot rate of the mark is $.60. A three-month futures contract on the mark is available for $.59 per unit. A call option on the mark is available with a three-month expiration date and an exercise price of $.60. The premium to be paid on the call option is $.01 per unit. Capital is very confident that the value of the mark will rise to at least $.62 in three months. It has been very accurate in its previous forecasts of the mark’s value. The management style of Capital is very risk-averse. Managers receive a bonus at the end of the year if they satisfy minimal performance standards. The bonus is fixed, regardless of how high above the minimum level one’s performance is. If performance is below the minimum, there is no bonus, and future advancement within the company is unlikely. a) As a financial manager of Capital, you have been assigned the task of choosing among three possible strategies: (1) hedge the DM position by purchasing futures, (2) hedge the DM position by purchasing call options, or (3) do not hedge. Offer your recommendation and justify it. b) Assume the previous information that was provided, except for this difference: Capital has revised its forecast of the mark to be worth $.57 three months from now. Given this revision, recommend whether Capital should (1) hedge the DM position by purchasing futures, (2) hedge the DM position by purchasing call options, or (3) not hedge. Justify your recommendation. Is your recommendation consistent with maximizing shareholder wealth?