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Your start-up company has negotiated a contract to provide a database installation for a manufacturing company in Poland. That firm has agreed to pay you
Your start-up company has negotiated a contract to provide a database installation for a manufacturing company in Poland. That firm has agreed to pay you $110,000 in three months time when the installation will occur. However, it insists on paying in Polish zloty (PLN). You don't want to lose the deal (the company is your first client!), but are worried about the exchange rate risk. In particular, you are worried the zloty could depreciate relative to the dollar. You contact Fortis Bank in Poland to see if you can lock in an exchange rate for the zloty in advance. You find the following table posted on the bank's Web site, showing zloty per dollar, per euro, and per British pound: 1 week 1 month 2 months 3 months purchase sale 3.1392 3.1793 3.1398 3.1766 3.1354 3.1764 3.1396 3.1753 2 weeks USD 3.1417 3.1747 EUR 3.7814 3.8226 GBP purchase sale 3.7804 3.8214 3.7836 3.8254 3.7871 3.8298 3.7906 3.8342 a. What exchange rate could you lock in for the zloty in three months? You could lock in an exchange rate of zloty per U.S. dollar in three months time through a forward contract with the bank. (Round to four decimal places.)
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