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An American firm has British pound-denominated accounts payable on its balance sheet. Managers believe the U.S. dollar exchange rate against the British pound will depreciate
An American firm has British pound-denominated accounts payable on its balance sheet. Managers believe the U.S. dollar exchange rate against the British pound will depreciate before the accounts will be paid.
The firm would want to enter into a currency swap by which it sends annual fixed payments in dollars to a swap dealer and receives annual fixed pound payments from the swap agent to hedge its foreign exchange rate risk.
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