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Wellman Inc., a Hong Kong-based company, just bought an Italian fashion brand for 70M, which the company will pay for in one years time. (a)
Wellman Inc., a Hong Kong-based company, just bought an Italian fashion brand for 70M, which the company will pay for in one years time.
(a) If Wellman uses a forward contract to hedge the full amount of this purchase at the one-year forward exchange rate of HK$10.5/, should Wellman buy or sell the euros forward? After carrying out this forward hedge, how much does Wellman need to pay (in HK$) in one years time?
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