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A Pakistani exporter has following transactions to be settled in following 6 months. Imports Exports...

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A Pakistani exporter has following transactions to be settled in following 6 months. Imports Exports A $ 5XXm B $ 4XXm Rs. 5Xm Rs. 5Xm $ 2XXm Following are the lending, borrowing and inflation rates. US $ Pak Lending 8% 10% Borrowing 10% 13% Inflation 5% 12% Spot rate 1 105 Required: Q 1. What is effective exchange rate. Q 2. Do they need to hedge. =

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