Suppose a Canadian firm buys $200,000 worth of television tubes from a Norwegian manufacturer for delivery in 60 days with payment to be made in 90 days (30 days after the goods are received).The rising Canadian deficit has caused the dollar to depreciate against the krone recently.The current exchange rate is 5.50 krones per Canadian dollar.The 90-day forward rate is 5.45 krones/dollar.The firm goes into the forward market today and buys enough Norwegian krones at the 90-day forward rate to completely cover its trade obligation.Assume the spot rate in 90 days is 5.30 krones per Canadian dollar.How much in Canadian dollars did the firm save by eliminating its foreign exchange currency risk with its forward market hedge?

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The Answer of Suppose a Canadian firm buys $200,000 worth of television tubes from a Norwegian manufacturer for delivery in 60 days with payment to be made in 90 days (30 days after the goods are received).The rising Canadian deficit has caused the dollar to depreciate against the krone recently.The current exchange rate is 5.50 krones per Canadian dollar.The 90-day forward rate is 5.45 krones/dollar.The firm goes into the forward market today and buys enough Norwegian krones at the 90-day forward rate to completely cover its trade obligation.Assume the spot rate in 90 days is 5.30 krones per Canadian dollar.How much in Canadian dollars did the firm save by eliminating its foreign exchange currency risk with its forward market hedge?

Suppose a Canadian Firm Buys $200,000 Worth of Television Tubes