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Empirical evidence indicates that the Forward market for foreign currencies is Efcient. You conduct business regularly with a company in Florence Italy and have been
Empirical evidence indicates that the Forward market for foreign currencies is Efcient. You conduct business regularly with a company in Florence Italy and have been inclined to hedge in the Forward market. An Intern has just brought in hedging data for last quarter's Euro denominated receivables. You generally receive between 6-8 million Euros each month. Spot value Month F value on Month Spot value Month Beginning Beginning for Month End End Spot?..4'1=$1.12, F?r'31?.-'Ir1 $1.18, Spot7f31 =$1.l9 Spot8.fl=$1.19, F8131 8.11 =$1.15, Spot8f31=$l.l? Spot E 9.21 = $1.18! F911 9.21 = $1.20, Spot 9;"30 = $1.22 1_) Make the case for continuing to employ the Forward market. 2_) Make the case for not hedging
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