A U.S. importer who owns a Belgian company 500,000 Euros
Question # 00795330
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Updated on: 02/23/2021 05:17 AM Due on: 02/23/2021
Hedging Foreign Exchange Risk: A Simple Example
1. A U.S. importer who owns a Belgian company 500,000 Euros payable 30 days from today expects that U.S. dollars will weaken during this period. What would you advise the importer to do? What would happen if the U.S. dollars were to strengthening during this period?
2. A U.S. importer purchases a currency option. If the foreign currency does not rise to the strike price, what should the importer do?
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Solution: A U.S. importer who owns a Belgian company 500,000 Euros