Suppose you need to buy 6 tons of Italian olives in 6 months for a fixed price
Fantastic news! We've Found the answer you've been seeking!
Question:
Suppose you need to buy 6 tons of Italian olives in 6 months for a fixed price contract (your sales quote is in USD). 6 tons of Italian olives currently costs 80,000euro. The current exchange rate is $1.2500 per Euro. You will only make 8% gross profit on selling your olives if the exchange rate stays the same, so you have to make sure that you protect Forex risk. You dont want to purchase them now and pay carrying costs or risk spoiling. What will the new direct quote for Euros be in 6 months if your Forex exposure ended up cutting your gross profit to half of the amount provided for in the original contract?
Related Book For
Fundamentals of Investing
ISBN: 978-0133075359
12th edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
Posted Date: