Parallel loan in order to reduce its exposure

Reference no: EM131042809

Assume that a euro is equal to $1.00 today. A U.S. firm could engage in a parallel loan today in which it borrows 1 million euros from a firm in Belgium and provides a $1 million loan to the Belgian firm. The loans will be repaid in 1 year with interest. Which of the following U.S. firms could most effectively use this parallel loan in order to reduce its exposure to exchange rate risk? (Assume that these U.S. firms have no other international business than what is described here.) Explain. Sacramento Co. will receive a payment of 1 million euros from a French company in 1 year. Stanislaus Co. needs to make a payment of 1 million euros to a German supplier in 1 year. Los Angele Co. will receive 1 million euros from the Netherlands government in 1 year. It just engaged in a forward contract in which it sold 1 million euros 1 year forward. San Mateo Co. will receive a payment of 1 million euros today and will owe a supplier 1 million euros in 1 year. San Francisco Co. will make a payment of 1 million euros to a firm in Spain today and will receive $1 million from a firm in Spain for some consulting work in 1 year.

Reference no: EM131042809

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