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a) A US company will need 1 million Polish zloty in 2 years to purchase imports. This company uses forward contracts to hedge its payables.
a) A US company will need 1 million Polish zloty in 2 years to purchase imports. This company uses forward contracts to hedge its payables. Under the following assumptions, how many dollars will the company need in 2 years? Assume that interest rate parity holds, the spot rate of the Polish Zloty is $0.30, and the 2 year annualised interest rate in the US is 5 per cent whereas the 2 year annualised interest rate in Poland is 11 per cent. (2 marks)
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