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Every year, Veras chain of candy stores pays one of their Swiss chocolate suppliers USD...

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Finance

Every year, Veras chain of candy stores pays one of their Swiss chocolate suppliers USD 6.5M for inventory, converted into CHF at the spot rate on the invoice date. Vera and her supplier have worked together for years, and both want to do something to reduce their exposure to exchange rate risk. They have decided to enter into a risk sharing agreement with upper and lower exchange rate bounds of CHF 0.95 per USD and CHF 1.05 per USD.

2. How much would Vera pay for her chocolate if the spot rate on the invoice data was CHF 1.09 per USD? Who benefits from the risk sharing agreement in this case?

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