Refer to Exhibit T9.1. Draw a risk profile (v/$ versus s/$) for each of the following: a.

Question:

Refer to Exhibit T9.1. Draw a risk profile (v€/$ versus s€/$) for each of the following:
a. Bernd's underlying currency risk exposure
b. a currency forward hedge of Bernd's exposure
c. the exposure of the net (or hedged) position
Exhibit T9.1
Bernd lives in Berlin and uses the euro as his currency of denomination. Bernd has an balance of $10 million due in three months. The spot is S€/$ = €1.20/$.
Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...