Compute the local receipt to newcrest if it use the forward


Company TJC (UK firm) is required is to purchase 1,000 ounces of pure gold from Newcrest Mining, a major gold producer in Australia. The parties have signed a supply contract at USD 1,200 per oz., with payment to be made in British pounds in 3 months' time. The exchange rate was set at GBP1 = USD 1.3200. However, contract completion is subject to approval by the relevant authorities, the outcome to be known in 2 months' time. Newcrest Mining needs to hedge the foreign gold exposure because of the increasing volatility of the pound post-Brexit. Newcrest has obtained the forward rate bid/offer quote of Australian dollars per pound, GBP 1.6400/50 for settlement in 3 months. Compute the local receipt to Newcrest if it use the forward market hedge, and discuss the advantages and disadvantages of this method.

Request for Solution File

Ask an Expert for Answer!!
Financial Management: Compute the local receipt to newcrest if it use the forward
Reference No:- TGS02612989

Expected delivery within 24 Hours