The case of transaction exposure is described as follows. Choose the correct answer in the parenthesis in the description of the case. The choice is in bold letters. My company sold a product to a German co., and sales department signed a contract to receive Euro 10,000 3 month later, A/R of Euro 10,000. The sales contract is delivered to my desk. I, a treasurer, am wondering how much USD my co. will get from Euro 10,000 3 months from now. The currency market is in turmoil, I will get more USD when USD weakens against EUR in the next 3 months. Market anticipates strong USD. However, if USD strengthens more than market expects, I will get (more /less) USD from sales contract of EUR 10,000. Are there an
The case of transaction exposure is described as follows. Choose the correct answer in the parenthesis in the description of the case. The choice is in bold letters.
My company sold a product to a German co., and sales department signed a contract to receive Euro 10,000 3 month later, A/R of Euro 10,000.
The sales contract is delivered to my desk. I, a treasurer, am wondering how much USD my co. will get from Euro 10,000 3 months from now.
The currency market is in turmoil, I will get more USD when USD weakens against EUR in the next 3 months.
Market anticipates strong USD. However, if USD strengthens more than market expects, I will get (more /less) USD from sales contract of EUR 10,000. Are there any possibility to lock in my USD receipt to a certain level, or at minimum. In that way, my USD receipt will not get any lower even though USD appreciates more than the rate I can contract (buy EURO/sell EURO) now.
How and what kind of contracts are available now to protect/hedge my position of A/R of EUR 10,000 against strong USD in the future?
I understand that if USD
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