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Now assume that a U.S.-based MNC just signed a contract to import electronic equipment from the U.K. At today's exchange rates, the shipment is worth
Now assume that a U.S.-based MNC just signed a contract to import electronic equipment from the U.K. At today's exchange rates, the shipment is worth $50 million. The current exchange rate is $1.2240/. The goods are to be delivered and the payment settled in British pounds in the three months. How much is the MNC foreign exchange exposure? An outflow of $50.00 million An inflow of $50.00 million An outfiow of 61.20 million An inflow of 61.20 million QUESTION 4 If the MNC decides to hedge its exposure to the pound. It should: Enter into a forward contract to buy pounds for $1.2280/ Enter into a forward contract to sell pounds for $1.2280/L Buy the pounds at the expected rate of $1.2160/f. Sell the pounds at the expected rate of $1.2160/2. Sell the pounds today at the current spot rate of $1.2180
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