A Peruvian company that exports citrus to the US expects to receive a payment in US$ within 60 days. The company wants to hedge against the exchange risk, whose current level is 3.75 PEN/US$. The risk-free rates in PEN and US$ are 7.5% and 3.5%, respectively, and are expected to remain at those levels for the next 3 months. What position (long/short) should the company take in the forward contract and at what price?

Answer rating: 100% (QA)

To hedge against the exchange risk the Peruvian company can take a position in a forward contract to ... View the full answer