1. Hedging with forward contracts 1. 2. STEP: 1 of 2 Suppose that Retrojo Inc. is a U.S. based MNC that will need to purchase F$1.90 million (Fijian dollars, F$) worth of imports from Fiji in 90 days. Currently, the spot rate for the Fijian dollar is $0.44 per F$. If Retrojo were to exchange U.S. dollars for the required F$1,900,000.00 Fijian dollars, it would need S (U.S. dollars). If Retrojo waits 90 days to make this exchange (perhaps due to insufficient funds on hand), and the Fijian dollar appreciates to $0.58 during those 90- days, then Retrojo would need $ (U.S. dollars). Thus, if Retrojo believes that the Fijian dollar will appreciate, it can its exposure to such exchange rate risk by locking in the original exchange rate through the use of a forward contract.

1. Hedging with forward contracts 2. STEP: 1 ot 2 Suppose that Retrojo Inc. is a U.S. based MNC that will noed to purchase F\$1,90 million (Filian dollars, F\$) worth of imports from Fijin 90 dars. Currently, the spot rate for the Fijan doliar is 50.44 per Fs. If Retrojo were to exchange U.S. dollars for the required F $1,900,000,00 fijian dolars, it would need (U.S. dollars). If Retrolo waits 90 davs to make this exchange (perhaps due to insufficient funds on hand), and the fijian dollar appreciates to 10.58 during those 90 days; then Retrojo would need (U.S. dollars). Thus, it Retro/o believes that the Fjian dollar will appredate, It can its exposure to such exchange rate risk by locising in the original exchange rate through the use of a forward contract