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You are receiving CAD 500,000 one year from today, but you would prefer USD. The current spot rate is CAD 0.75 per USD, and the
You are receiving CAD 500,000 one year from today, but you would prefer USD. The current spot rate is CAD 0.75 per USD, and the one year forward rate is CAD 0.80 per USD. Riskless Canadian debt pays 4% annually. If US riskless debt actually pays 8%, what would be the best way to hedge your exposure to the US/CAD exchange rate? Assume you may enter into forward contracts and borrow or lend at the riskless rate.
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Here are the two main options you have to hedge your exposure to the USCAD exchange rate and their pros and cons Option 1 Enter into a oneyear forward ...
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Auditing A Practical Approach with Data Analytics
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
1st edition
1119401747, 978-1119401742
