Attempts Do No Harm / 2 1. Hedging with forward contracts 1. 2. STEP: 1 of 2 Suppose that Retrojo Inc. is a U.S. based MNC that will need to purchase F$1.80 million (Fijian dollars, F$) worth of imports from Fiji in 90 days. Currently, the spot rate for the Fijian dollar is $0.52 per F$. If Retrojo were to exchange U.S. dollars for the required F$1,800,000.00 Fijian dollars, it would need $ (U.S. dollars). If Retrojo waits 90 days to make this exchange (perhaps due to insufficient funds on hand), and the Fijian dollar appreciates to $0.64 during those 90- days, then Retrojo would need $ (U.S. dollars). Thus, if Retrojo believes that the Fijian dollar will appreciate, it can its exposure to such exchange rate risk by locking in the original exchange rate through the use of a forward contract. Grade Step 1 TOTAL SCORE: 0/2 (to complete this step and unlock the next step)