Explore BrainMass

Explore BrainMass

    Managing Exchange Rate Risk

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    In Jamaica, the current exchange rate against the US Dollar is J$85.00 to US$1.00.

    The question is: Do you think an American company doing business in Jamaica should hedge their currency or not? Give reasons for your answer.

    © BrainMass Inc. brainmass.com March 4, 2021, 11:10 pm ad1c9bdddf

    Solution Preview

    Whether a company needs to hedge its risk depends on who ultimately bears the risk.

    I will give you two example, in the first one, the US company should hedge its currency (though things like futures), in the second example, the company does not need to.

    Our first example is a clothing factory, and the factory produces its products in Jamaica. The company pays Jamaican dollar to the workers, and ...

    Solution Summary

    Managing exchange rate risks are examined.