Suppose that a US-based company plans to purchase goods from a Japanese supplier, and the agreed price
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Suppose that a US-based company plans to purchase goods from a Japanese supplier, and the agreed price is 120 million yen. The company has to convert US dollars (USD) into Japanese yen (JPY) to pay for the goods. The spot exchange rate is 1 USD = 100 JPY. The company can use a 3-month forward contract to lock in the exchange rate at 1 USD = 110 JPY. If the company uses a forward contract to hedge its currency risk, what will be the cost of the goods in USD, assuming the forward rate is unbiased?
Related Book For
Spreadsheet Modeling & Decision Analysis A Practical Introduction to Management Science
ISBN: 978-0324656633
5th edition
Authors: Cliff T. Ragsdale
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