Question

a) Why do you think Volkswagen's management decided to hedge only 30 percent of their foreign currency exposure in 2003? What would have happened if they had hedged 70 percent of their exposure? (12 points)

b) An oil company has agreed to buy oil from Russia at 1,800 Rubles per barrel. Have it shipped to Amsterdam by a Norwegian shipping line for 20 Krones per barrel. The oil will be refined in Rotterdam for 20 Euros per barrel. Finally, a Philippine shipping line will bring gasoline to Miami for 200 Philippine pesos per barrel. What is the landed cost in dollarsof this four-part transaction? Please show your calculations. (8 points)

Answer 1

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