Your firm will be importing a large order of its inputs from the United States in three months and is concerned that the Canadian dollar might fall against the U.S.dollar over that time.To hedge your risk,you decide to enter into a currency forward contract to purchase 750,000 USD at a rate of 1.0114 CAD/USD.If the spot exchange rate in 3 months' time ends up being 1.0346 CAD/USD,what is your gain or loss from hedging compared to remaining unhedged?
A) $0
B) $17,400
C) $16,629
D) -$17,400
E) -$16,629
Correct Answer:
Verified
Q20: At current exchange rates it takes 0.1475
Q21: A _ strategy replicates the forward contract
Q22: If a firm hedges a future purchase
Q23: The one-year forward exchange rate is 40
Q24: The spot exchange rate for the British
Q26: A firm wants to hedge a potential
Q27: A Canadian importer needs 10 million U.S.dollars
Q28: The importer-exporter dilemma is caused by:
A)changing interest
Q29: A Canadian importer needs 1 million U.S.dollars
Q30: IBM enters into a forward contract to
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