Business, 14.04.2020 19:35 SunsetPrincess

12. Study Questions #12. Ch 11. Suppose the spot rate of the pound today is $1.65 and the three-month forward rate is $1.67. Complete the following sentence to explain how a U. S. importer who has to pay 18,000 pounds in three months can hedge the foreign exchange risk. The U. S. importer can cover foreign exchange risk by purchasing £18,000 for three-month delivery at $1.67 per pound. In order to do that, the importer has to be willing to pay $0.02 more per pound than today’s spot rate to guard against the possibility that the spot rate in three months will be than $1.65 per pound. In three months, when her payments are due, the importer will pay $ and get £18,000 needed for payment, what the pound spot rate is at that time. What occurs if the U. S. importer does not hedge, and the spot rate of the pound in three months is $1.70 per pound

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12. Study Questions #12. Ch 11. Suppose the spot rate of the pound today is $1.65 and the three-mont...