An American firm has an account payable of 5 million in 30 days. The firm...
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Accounting
An American firm has an account payable of 5 million in 30 days. The firm can handle its open position using the following methods: Method 1: Use forward contracts with a 30-day forward rate of US$1.1132 per . Method 2: Use options on with an exercise price of US$1.1123 per in 30 days and a premium of US$0.0008 per . Method 3: Leave the position open.
Find the range of the spot US$/ exchange rate 30 days from now will make the Austrian firm leave its position unhedged. Explain.
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