35. Suppose that a U.S. company wishes to purchase goods from a German producer. The U.S. firm agrees to take the delivery of the goods in three months and to pay €1 million Euros at that time. This company wishes to avoid this exchange rate risk by buying Euros at the 3-month forward rate, f=0.95 (€/S). Then, how much this company would have to pay in US dollars in exchange for €l million Euros? a. $1 million dollars. b. $1,052,632 dollars. c. $950,000 dollars.

35. Suppose that a U.S. company wishes to purchase goods from a German producer. The U.S. firm agrees to take the delivery of the goods in three months and to pay €1 million Euros at that time. This company wishes to avoid this exchange rate risk by buying Euros at the 3-month forward rate, f=0.95 (€/S). Then, how much this company would have to pay in US dollars in exchange for €l million Euros? a. $1 million dollars. b. $1,052,632 dollars. c. $950,000 dollars.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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