XYZ Corp, a US based importer, makes a purchase of crystal glassware from a firm in Switzerland for 39,960 Swiss francs or $24,000, at the spot rate of 1.665 francs per dollar. The terms of the purchase are net 90 days, and the US firm wants to cover this trade payable with a forward market hedge to eliminate its exchange rate risk. Suppose the firm completes a forward hedge at the 90-day forward rate of 1.682 francs.
If the spot rate in 90 days is actually 1.638 francs, how much will the US firm have saved in US dollars by hedging its exchange rate exposure?© BrainMass Inc. brainmass.com June 3, 2020, 11:47 pm ad1c9bdddf
The solution explains how to calculate the amount the US firm have saved in US dollars by hedging its exchange rate exposure