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Question: you expect to receive zar 1000 00000 in 3 months...

Question details

You expect to receive ZAR 1000 000.00 in 3 months time but you are worried about adverse movements (a strengthening dollar) in exchange rates and want to hedge against this,

You gather the following information from the foreign exchange market;

Spot exchange rate $1.7640/ ZAR

Three month forward rate $1.7540/ ZAR

Forecast spot exchange rate three months from now $1.7400/ZAR

Show how you can hedge against the currency risk using a forward contract.

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