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Cedar Falls Co has a subsidiary in Brazil where local interest rates are high. It considers borrowing dollars and hedging exchange rate risk by selling
Cedar Falls Co has a subsidiary in Brazil where local interest rates are high. It considers borrowing dollars and hedging exchange rate risk by selling Brazillian real forward in exchange for dollars for the periods in which it would need to make loan payments in dollars. Assume that forward contracts on the real are available. What is a limitation to this strategy?
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