Prepare a report (2-3 pages) that discusses derivative financial instruments and evaluates the purchase of a hypothetical currency option.
This assessment will allow you to practice two approaches for hedging an exposure to the change in a foreign currency.
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies through corresponding scoring guide criteria:
Hopkins Chocolate Company buys green cocoa beans that are processed into consumer products. Cocoa beans are currently selling for $2,000 United States Dollars (USD) per metric ton. Hopkins buys 100 tons at a time from Abamo Chocolate in Ghana, Africa. Normal purchase procedures stipulate that the purchase contract is denominated in Ghanaian Cedi and payment in Cedi is due 90 days after purchase.
Recently, the treasurer of Hopkins became concerned that the U.S. Dollar would change in value against the Ghanaian Cedi. Consequently, Hopkins bought a 90-day option.
You are the controller for Hopkins Chocolate Company.
As the controller of Hopkins Chocolate Company, you work closely with the treasurer. She has requested that you prepare a report to help explain the recent purchase of the 90-day option to members of the board of directors. Address the following in your report (3–5 pages):
Since you plan to share your report with the treasurer and the board of directors, you want this report to be clear, well-organized, and readable. Your supervisor has requested that your report be 2-3 pages so that you have enough space to develop your ideas and provide some scholarly and/or professional context.
Faculty will use the scoring guide to review your deliverable as if s/he were a director on the board. Review the scoring guide prior to developing and submitting your assessment.
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