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A Peruvian company buys raw materials from a European company and pays in euros. It anticipates that in six months it will buy 20 million
A Peruvian company buys raw materials from a European
company and pays in euros. It anticipates that in six months it
will buy 20 million units of the material and will pay a price of
2.55 per unit. The current six-month forward exchange rate is
that one Peruvian sol = 0.2621 euros. Explain the risk faced by the peruvian company and how it can hedge that risk.
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