Question
The Ubisense Group Plc have exposure of Paraguay Guarani (Gs) Gs37.5 million. The spot rate on the Bolivia Bolviano ($b) is Gs2.4558/$b1, while the 60-day
The Ubisense Group Plc have exposure of Paraguay Guarani (Gs) Gs37.5 million. The spot rate on the Bolivia Bolviano ($b) is Gs2.4558/$b1, while the 60-day future rate is Gs2.4550/$b1. Required: (a) If Ubisense believe that the Bolivia Bolviano will appreciate in value against the Paraguay Guarani, such that they expect the spot rate to be Gs2.4600/$b1 at the end of 60 days, what should they do? (b) If Ubisense believe that the Bolivia Bolviano will depreciate in value against the Paraguay Guarani such that they expect the spot rate to be Gs2.3800/$b1 at the end of 60 days, what should they do?
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