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Suppose IBM signed a contract to buy a supply of computer chips from a German firm. The

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Suppose IBM signed a contract to buy a supply of computer chips from a German firm. The price is 10 million euros, and the chips will be delivered immediately, but IBM can delay payment for six months if it wants to. What risk would IBM be exposed to if it delays payment? Can it hedge this risk? Should it pay now or delay payment?

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IBM would want to take advantage of the free trade credit so it would want ...View the full answer


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