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Suppose you are the owner of U.S. retail store and purchase tableware worth one million Euros () from Bernardaud, the French manufacturer. To provide time
Suppose you are the owner of U.S. retail store and purchase tableware worth one million Euros () from Bernardaud, the French manufacturer. To provide time for you to sell your new inventory of tableware, Bernardaud gives you one year to pay. You are concerned that the Euro might rise in value before next year and reduce your profits. To hedge this risk, you call your bank and lock in a one-year forward contract with a forward price of $2 / .
Is the payoff profile chart an upward-sloping line or an downward-sloping line?
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