Question
Assume the spot rate on Friday between the USD and GBP was 1.6187 USD per GBP. Suppose you are purchasing 200000 GBP worth of Scotch
Assume the spot rate on Friday between the USD and GBP was 1.6187 USD per GBP. Suppose you are purchasing 200000 GBP worth of Scotch Whisky deliverable (product and payment) in 3 months with the contract set up between you and your supplier on Friday. How much is that shipment worth in USD. Assume that you want to hedge against exchange rate risk, and go to the bank on Friday. The financial specialist at the bank gives you the official 3 month forward rate at 1.6175 USD per GBP. What does that imply for your payment to the bank in 3 months to get the 200000 GBP?
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