Uses a forward contract to hedge its payables

Reference no: EM131042778

California Co. will need 1 million Polish zloty in 2 years to purchase imports. Assume interest rate parity holds. Assume that the spot rate of the Polish zloty is $.30. The 2-year annualized interest rate in the United States is 5 percent, and the 2-year annualized interest rate in Poland is 11 percent. If California Co. uses a forward contract to hedge its payables, how many dollars will it need in 2 years?

Reference no: EM131042778

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