Question
Stover Corporation, a U.S. based exporter, makes sales of computer chips to a firm in Switzerland for 66,600 Swiss francs revenues, or $40,000, at the
Stover Corporation, a U.S. based exporter, makes sales of computer chips to a firm in Switzerland for 66,600 Swiss francs revenues, or $40,000, at the spot rate of 1.365 francs per dollar. The terms of the sales are net 90 days, and the U.S. firm wants to cover this trade receivables with a forward market hedge to eliminate its exchange rate risk. Suppose the firm completes a forward hedge at the 90-day forward rate of 1.02 francs. If the spot rate in 90 days later is actually 1.219 francs, how much will the U.S. firm have saved or lost in U.S. dollars by hedging its exchange rate exposure? excel demonstration please
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started