ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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 (€/$). Then, how much this company would have to pay in US dollars in exchange for €1 million Euros?
a. $1 million dollars.
b. $1,052,632 dollars.
c. $950,000 dollars.
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