Question
A US exporter would like to do business with an importer in Haiti. The importer has requested to make payment in Haitian Gourde (HG) for
A US exporter would like to do business with an importer in Haiti. The importer has requested to make payment in Haitian Gourde (HG) for a total of 260 Million HG in one years time. Currently, the dollar is trading at 65 HG, and a bank in Haiti offers deposits and loans at an interest rate of 50% (payable in Gourde), while the interest rate in a US bank (payable in US dollars) is 5%.
Assume no forward contract or options in HG are available. How can the exporter ensure a certain dollar value for her exports today? How much will she receive (in dollar terms)? Show your work.
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