Solution-Receive if payment were made today

Receive if payment were made today

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Reference no: EM131502400

Today the XYZ Corporation shipped goods valued at €1 million to a customer in Belgium. Payment is due in 90 days, and the Belgian firm will make the payment in euros. Today's spot rate is €1/$1.40. The 90-day forward rate is €1/$1.38.

a. How many dollars would XYZ receive if payment were made today?

b. If XYZ sells €1 million forward for 90 days, how much is it assured to receive 90 days from now?

c. If XYZ had not hedged in the forward market and the spot rate 90 days from now is €1/$1.39, how much would XYZ receive (in U.S. dollars)?

d. If the U.S. dollar were to weaken in the 90 days and XYZ did not hedge, would it benefit or lose?

Reference no: EM131502400

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Reference no: EM131502400

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