Your company will receive C$600,000 in 90 days. The 90-day forward rate in the Canadian dollar is $.80. If you use a forward hedge, you will:
A) receive $750,000 today.
B) receive $750,000 in 90 days.
C) pay $750,000 in 90 days.
D) receive $480,000 today.
E) receive $480,000 in 90 days.

Question

Quizplus · Accepted Answer

To hedge the C$600,000 using the 90-day forward rate of $0.80, you multiply the amount in Canadian dollars by the forward rate to get the amount in US dollars you will receive in 90 days: C$600,000 * $0.80 = $480,000.

Your Company Will Receive C$600,000 in 90 Days