Currencies – U.S. dollar foreign-exchange rates. May 5, 2011 Country/currency………..in US$..............per US$ British Pound……………….1.5347…………….0.6516 Norwegian Kroner……….0.1690……………..5.9173...
Currencies – U.S. dollar foreign-exchange rates. May 5, 2011
Country/currency………..in US$..............per US$
British Pound……………….1.5347…………….0.6516
Norwegian Kroner……….0.1690……………..5.9173
Thai Baht……………………..0.0310……………..32.250
Mr. Charles imports light bulbs from Norway to the United States. He has a contract to purchase from a Norwegian firm 10,000 light bulbs that he plans to sell in Chicago in 30 days. Assuming that futures trading exists between U.S. dollars and Norwegian Kroner, how can Mr. Charles use such a market to hedge foreign currency risk?
| a. |
Contract to sell Kroner at an agreed upon price in 30 days |
|
| b. |
Contract to sell US Dollars at an agreed upon price in 30 days |
|
| c. |
Contract to buy Kroner at an agreed upon price in 30 days |
|
| d. |
Futures contracts cannot be used to hedge in this circumstance |
|
| e. |
Contract to buy US Dollars at an agreed upon price in 30 days |
Homework Answers
Option , d , Futures contracts cannot be used to hedge in this circumstance
Reason: The quoted currencies are not in US dollars and also the exchange rates are fluctuating and hence future contracts cannot be used.
Add Answer to:
Currencies – U.S. dollar foreign-exchange rates. May 5, 2011
Country/currency………..in US$..............per US$
British Pound……………….1.5347…………….0.6516
Norwegian Kroner……….0.1690……………..5.9173...
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