Question 2 (5 marks) Rio Tinto has operations in Europe. It would like to lock in the exchan ge rate on the E200M i...
Question 2 (5 marks) Rio Tinto has operations in Europe. It would like to lock in the exchan ge rate on the E200M in operating income generated in the EU this quarter that they would like to repatriate. They are considering whether they should enter into a currency forward contract for the 200M at an exchange rate of $1.20 per Euro with a delivery date of June Rio Tinto's investment expenditures are based in Australia but are focused on product innovations for the EU market. The size of these investment expenditures is expected to increase as the European economy strengthens. If Rio plans on using its repatriated earnings from the EU, should it hedge these earnings with the currency futures contract? Explain completely. funding these investments
Question 2 (5 marks) Rio Tinto has operations in Europe. It would like to lock in the exchan ge rate on the E200M in operating income generated in the EU this quarter that they would like to repatriate. They are considering whether they should enter into a currency forward contract for the 200M at an exchange rate of $1.20 per Euro with a delivery date of June Rio Tinto's investment expenditures are based in Australia but are focused on product innovations for the EU market. The size of these investment expenditures is expected to increase as the European economy strengthens. If Rio plans on using its repatriated earnings from the EU, should it hedge these earnings with the currency futures contract? Explain completely. funding these investments