An American importer needs to pay 100,000 in 30 days and would like to sign a forward
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An American importer needs to pay £100,000 in 30 days and would like to sign a forward contract to hedge the exchange rate risk. Should the importer buy or sell pounds through a forward contract? Suppose the 30-day forward rate is $1.60/£ and after signing the contract the spot rate in 30 days turns out to be $1.55/£. How many dollars does the firm have to pay in 30 days? Should the firm have not hedged?
Exchange RateThe 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...
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The importer should buy pounds forward It would pay 160100000 160000 in 30 days to acquire the po...View the full answer
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Related Book For 
Financial Institutions, Markets and Money
ISBN: 978-1119330363
12th edition
Authors: David S. Kidwell, David W. Blackwell, David A. Whidbee, Richard W. Sias
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