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Hedging using forward contract

5. Intel Corporation has Euros 100 million payables due in 90-days. The current spot exchange rate is $1.2025/Euro. The 90-day forward rate is $1.2100/Euro. If Intel wants to hedge its payables in Euro 100 million, suggest a suitable hedging strategy using the forward contract and compute the total cost with the forward rate? If 90-days later the spot rate turned out to be $1.0251/Euro, compute any cost advantage/disadvantage to hedging using the forward contract.

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5. Intel Corporation has Euros 100 million payables due in 90-days. The current spot exchange rate is $1.2025/Euro. The 90-day forward rate is $1.2100/Euro. If Intel wants to hedge its payables in Euro 100 million, suggest a ...

Solution Summary

Illustrates the use of forward contract for hedging.

$2.19