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Very low level of tolerance for risk

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You work for a US-based company that has very low level of tolerance for risk. They even buy insurance to cover their assets in case of alien attack or destruction by asteroids or comets. The company regularly sells its products in Colombia and receives Colombian pesos 180 days after sale. You talk to the bank and find that forward contracts to convert Pesos to Dollar 180 days from now are actually priced at premium (i.e. if you enter into the forward contract you will get a rate better than the spot rate). The transaction costs associated with the forward contract are negligible. You talk to your boss who flat out refuses to enter into the forward contract. What would possibly explain this? (Your company does not have any option position or money market hedge in place.)

Reference no: EM131213823

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