Description of this paper

Exchange rates and growth

Description

solution


Question

an american importer needs to pay 100,000 euros in 30 days and would like to sign a forward contract to hedge the exchange risk. should the importer buy or sell pounds through a forward contract? suppose the 30 day forward rate is $1.60/ euro and after signing the contract, the spote rate in 30 days turns out to be $1.55. how many dollars does the firm have to pay in 30 days? should the firm have not hedged?

 

Paper#18189 | Written in 18-Jul-2015

Price : $27
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