Suppose that Daimler AG, which manufacturers Mercedes-Benz automobiles, sells 5 million worth of automobiles to U.S. importers.
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Suppose that Daimler AG, which manufacturers Mercedes-Benz automobiles, sells €5 million worth of automobiles to U.S. importers.
Assuming that the current exchange rate is $1.22 = €1 and Daimler agrees to accept payment of $6.1 million in 90 days, answer the following questions.
a. What exchange-rate risk does Daimler face?
b. In what alternative ways can Daimler hedge this exchange-rate risk?
Give a specific example of how Daimler could hedge this exchange-rate risk.
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Related Book For
Money Banking And The Financial System International Edition
ISBN: 978-1292000183
2nd Edition
Authors: R. Glenn Hubbard ,Anthony P Obrien
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