Business Idea: U.S based Company, product made in China, then sold in Germany for Euro (Office tables)

Hedging with Forward Contracts

1.Given your exposure to exchange rate risk, explain how you could use forward contracts to hedge.

2. Explain how you could use currency options to hedge your exposure.

3.Review the currency options quotations for the foreign currency of concern in The Wall Street Journal or from an Internet source, and determine the premium that would be paid to be able to sell the currency at today's spot rate. (If the currency option data are not available for the currency of concern, skip this question.)