Problemsuppose the spot rate of the pound today is 170 and, Ask an Expert

Accounting

Problem:

Suppose the spot rate of the pound today is $1.70 and the three-month forward rate is $1.75.

Required:

Question 1: How can a U.S. importer who has to pay 20,000 pounds in three months hedge his or her foreign-exchange risk?

Question 2: What occurs if the U.S. importer does not hedge and the spot rate of the pound in three months is $1.80?

Note: Provide support for your underlying principle.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167696

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