To hedge a In a foreign currency, a firm may a currency futures contract for tha

Question

To hedge a In a foreign currency, a firm may a currency futures contract for that currency. A) receivable; purchase 8) payable; sell C) payable; purchase d) none of these 4. lorre Company needs 200,000 Canadian dollars (C$) in 90 days and is trying to determine whether or not to hedge this position. Lorre has developed the following probability distribution for the Canadian dollar: The 90-day forward rate of the Canadian dollar is $.575, and the expected spot rate of the Canadian dollar in 90 days is $.55. If Lorre implements a forward hedge, what is the probability that hedg.ng will be more costly to the firm than not hedging?

Explanation / Answer

Therefore the $ 96,923 is the $ amount received by Parker after 360 days if money market hedge is used.

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