Question
Ninety days ago, a British firm bought merchandise from a Dutch company for 100,000. The exchange rate at the time of the sale was 0.855/.
Ninety days ago, a British firm bought merchandise from a Dutch company for 100,000. The exchange rate at the time of the sale was 0.855/. The firm chose not to hedge to reduce or eliminate the risk of changes in the exchange rate. If the exchange rate changes to 0.845/, then what profit or loss will the British firm realize?
Ninety days ago, a British firm sold merchandise to a Spanish company for 500,000. The exchange rate at the time of the sale was 0.870/. Forty-five days ago, the firm chose to hedge to reduce or eliminate the risk of changes in the exchange rate by entering a forward contract that locked in an exchange rate of 0.891/. If the exchange rate today is 0.897/, then how much will the British firm be paid in pounds?
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