Question
Suppose that Retrojo Inc. is a U.S. based MNC that will need to purchase F$1.70 million (Fijian dollars, F$) worth of imports from Fiji in
Suppose that Retrojo Inc. is a U.S. based MNC that will need to purchase F$1.70 million (Fijian dollars, F$) worth of imports from Fiji in 90 days. Currently, the spot rate for the Fijian dollar is $0.73 per F$.
If Retrojo were to exchange U.S. dollars for the required F$1,700,000.00 Fijian dollars, it would need ______________(U.S. dollars). If Retrojo waits 90 days to make this exchange (perhaps due to insufficient funds on hand), and the Fijian dollar appreciates to $0.86 during those 90-days, then Retrojo would need ___________(U.S. dollars). Thus, if Retrojo believes that the Fijian dollar will appreciate, it can ________(increase OR reduce) its exposure to such exchange rate risk by locking in the original exchange rate through the use of a forward contract.
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