The following is the spot and forward rates of dollar against Euro.Spot30-day forwardEuro/$0.850.90You sign a contract for selling John Deere with the amount of 1 billion euros that will be delivered in30days. You expect the 30day later the spot rates of dollar to be 0.75 with 50% chance and 0.95 with50%. What is the expected dollar amount if no forward has been used? As a risk-neutral person, is it agood idea to use the forward?

in this we have to calculate expected forward rate and find the required amount.

Spot 30-day forward 0.85 0.90 gn a contract for selling John Deere with the amount of 1 billion euros that will be delivered in 's. You expect the 30day later the spot rates of dollar to be 0.75 with 50% chance and 0.95 with What is the expected dollar amount if no forward has been used? As a risk-neutral person, is it a idea to use the forward?

Spot 30-day forward 0.85 0.90 gn a contract for selling John Deere with the amount of 1 billion euros that will be delivered in 's. You expect the 30day later the spot rates of dollar to be 0.75 with 50% chance and 0.95 with What is the expected dollar amount if no forward has been used? As a risk-neutral person, is it a idea to use the forward?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 56QA

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