Question
Your London-based firm expects to receive 50,385,000 in 6 months from a Japanese corporate customer. To hedge the exchange rate risk, your firm enters into
Your London-based firm expects to receive 50,385,000 in 6 months from a Japanese corporate customer. To hedge the exchange rate risk, your firm enters into a forward agreement at a forward rate of 1.00 = $0.0089. Suppose you calculate the gain or loss realized on the forward given a potential future spot exchange rate 1.00 = $0.0077. What is the value of the gain or loss? (READ THE NEXT SENTENCE CAREFULLY!). Please note you need to sign your answer carefully, for example, an answer of -5 (i.e., a negative 5) would mean a $5 loss, and an answer of of 5 (i.e., a positive 5) would mean a $5 gain. Round and express your answer to the nearest whole dollar (i.e., to the nearest ingeter).
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