. In May 2020, the American company Berrings placed an order with the Italian company...
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Finance
. In May 2020, the American company Berrings placed an order with the Italian company Maschetti for an amount of 500,000 and during the same period, it acquired a forward contract for the purchase of 500,000 at a forward rate of $1.29/ in May 2021.
a) If in May 2021, the exchange rate is $1.45/, how much would Bertolli company have to pay in dollars in May 2021?
b) Assuming that there are no transaction costs (i.e., hedging is "free"), what is the expected impact of the currency risk hedging on the cash flows of this company (in terms of variability and value)?
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