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Question 6: NCR Co. purchases computer chips denominated in euros on a monthly basis from a Belgium supplier. To hedge its exchange rate risk, this

Question 6:

NCR Co. purchases computer chips denominated in euros on a monthly basis from a Belgium supplier. To hedge its exchange rate risk, this U.S. firm negotiates a three-month forward contract three months before the next order will arrive. In other words, NCR Co is always covered for the next three monthly shipments. Because NCR Co consistently hedges in this manner, it is not concerned with exchange rate movements. Is NCR Co insulated from exchange rate movements? Explain.

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