Suppose the spot rate of the pound today is $1.70 and the three-month forward rate is $1.75.
Question:
Suppose the spot rate of the pound today is $1.70 and the three-month forward rate is $1.75.
a. How can a U.S. importer who has to pay 20,000 pounds in three months hedge his or her foreign-exchange risk?
b. What occurs if the U.S. importer does not hedge and the spot rate of the pound in three months is $1.80?
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a The US importer can cover her foreign exchange risk by purchasing 20000 pou...View the full answer
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