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Suppose the spot rate of the pound today is $1.70 and the three-month forward rate is $1.75. a. How can a U.S. importer who has

Suppose the spot rate of the pound today is $1.70 and the three-month forward rate is $1.75.

a. How can a U.S. importer who has to pay 20,000 pounds in three months hedge the foreign exchange risk?

b. What occurs if the U.S. importer does not hedge and the spot rate of the pound in three months is $1.80?

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