the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The US risk-free rate is 4.0 percent, and the UK. risk-free rate is 3.0 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $2.10. a. Whether you should use a long or short forward contract to hedge the currency risk O Long position in forward contract O Short position in forward contract b. Calculate the no-arbitrage price at which you could enter into a forward contract that expires in 30 days. (Do not round intermediate calculations. Round your answer to 4 decimal places.) No-arbitrage price c. Move forward 10 days. The spot rate is $2.13. Interest rates are unchanged. Calculate the value of your forward position. (Do not round Intermediate calculations Round your answer to 4 decimal places)

the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The US risk-free rate is 4.0 percent, and the UK. risk-free rate is 3.0 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $2.10. a. Whether you should use a long or short forward contract to hedge the currency risk O Long position in forward contract O Short position in forward contract b. Calculate the no-arbitrage price at which you could enter into a forward contract that expires in 30 days. (Do not round intermediate calculations. Round your answer to 4 decimal places.) No-arbitrage price c. Move forward 10 days. The spot rate is $2.13. Interest rates are unchanged. Calculate the value of your forward position. (Do not round Intermediate calculations Round your answer to 4 decimal places)

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 23QA

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