You Have Decided to Hedge Your Exchange-Rate Risk in Your

question 45

Multiple Choice

You have decided to hedge your exchange-rate risk in your U.S.-based firm by contracting forward to buy 500,000 Swiss Francs for delivery in one year.The current exchange rate is Sf1.6/$.The forward rate is Sf1.7/$(U.S.) .How much better (worse) off are you if you don't buy the forward contract and instead pay the spot rate in one year if it turns out to be Sf1.65/$?

• A)($14,245)
• B)($8,912)
• C)$8,912
• D)$27,472 current Dollar commitment =

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