b) What are the costs and the benefits of each type of foreign exchange contract and strategy?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Solve b
Suppose a U.S corporation imports technologically innovative machinery from
UK and needs to pay 1 million pounds in 60 days.
a) Discuss as many alternative foreign exchange contracts and investment
strategies available to this corporation in meeting its obligation as you
can think of.
b) What are the costs and the benefits of each type of foreign exchange
contract and strategy?
c) How do you think the expected returns to each strategy are related, and why?
d) How would your answer change if the corporation was bidding to win a
contract to purchase these machines from the UK, if at all?
Transcribed Image Text:Suppose a U.S corporation imports technologically innovative machinery from UK and needs to pay 1 million pounds in 60 days. a) Discuss as many alternative foreign exchange contracts and investment strategies available to this corporation in meeting its obligation as you can think of. b) What are the costs and the benefits of each type of foreign exchange contract and strategy? c) How do you think the expected returns to each strategy are related, and why? d) How would your answer change if the corporation was bidding to win a contract to purchase these machines from the UK, if at all?
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