Solve b Suppose a U.S corporation imports technologically innovative machinery fromUK and needs to pay 1 million pounds in 60 days.a) Discuss as many alternative foreign exchange contracts and investmentstrategies available to this corporation in meeting its obligation as youcan think of.b) What are the costs and the benefits of each type of foreign exchangecontract and strategy?c) How do you think the expected returns to each strategy are related, and why?d) How would your answer change if the corporation was bidding to win acontract to purchase these machines from the UK, if at all?

A foreign exchange contract is a contract between two parties that is legally binding. It is to…

Answered: b) What are the costs and the benefits…

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b) What are the costs and the benefits of each type of foreign exchange contract and strategy?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 8P

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Question

Solve b

Suppose a U.S corporation imports technologically innovative machinery from
UK and needs to pay 1 million pounds in 60 days.
a) Discuss as many alternative foreign exchange contracts and investment
strategies available to this corporation in meeting its obligation as you
can think of.
b) What are the costs and the benefits of each type of foreign exchange
contract and strategy?
c) How do you think the expected returns to each strategy are related, and why?
d) How would your answer change if the corporation was bidding to win a
contract to purchase these machines from the UK, if at all?

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