Question

A German firm has a contract to pay for $11,700,000 in equipment from a US manufacturer...

A German firm has a contract to pay for $11,700,000 in equipment from a US manufacturer in 30 days. The current spot rate is $1.17/euro.

a. The German firm has an asset/liability position in dollars.

b. The German firm faces the risk that the dollar will appreciate/depreciate. c. How can the firm hedge this risk (be specific and detailed)?

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