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A USFirm Has a Legal Obligation to Pay FFr5 Million One

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A U.S.firm has a legal obligation to pay FFr5 million one year from now and is wondering how they can hedge the exchange risk.The spot exchange rate is FFr5.5/$and the forward rate is FFr5.6/$.The one-year U.S.interest rate is 5% and the French rate is 5.5%.What do you suggest?


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