Suppose your firm is planning to pay for goods imported from France. The payment will be made in two months and will require 525.5 million euro. The current exchange rate, available in the forward market, is $1.0993 =1 euro. Explain the terms of the forward contract that your firm would need to negotiate to protect the firm against changes in the $/ € exchange rate?

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.