Mini-Case: Use of Foreign Exchange Markets Each month, the O'Hare Sports Export Company (a U.S. firm...

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Finance

Mini-Case: Use of Foreign Exchange Markets
Each month, the O'Hare Sports Export Company (a U.S. firm basedin Newport, RI) receives an order for footballs from a BritishSporting Goods distributor. The monthly payment for the footballsis denominated in British pounds, as requested by the Britishdistributor. John Novack, owner of the O'Hare Sports ExportCompany, must convert the pounds received into dollars.
Questions to answer:
1. Define the spot market.
2. Explain how the O'Hare Sports Export Company could use thespot market to facilitate the exchange of currencies. Bespecific.
3. Define the forward market.
4. Explain how the O'Hare Sports Export Company is exposed toexchange rate risk and how it could use the forward market to hedgethis risk.
Please answer in DETAIL, thank you!

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1 Spot market is a financial market where financial instruments securities and commodities are traded for immediate delivery in cash 2 In spot market buyer and seller creates spot price by posting their buy See Answer

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Mini-Case: Use of Foreign Exchange MarketsEach month, the O'Hare Sports Export Company (a U.S. firm basedin Newport, RI) receives an order for footballs from a BritishSporting Goods distributor. The monthly payment for the footballsis denominated in British pounds, as requested by the Britishdistributor. John Novack, owner of the O'Hare Sports ExportCompany, must convert the pounds received into dollars.Questions to answer:1. Define the spot market.2. Explain how the O'Hare Sports Export Company could use thespot market to facilitate the exchange of currencies. Bespecific.3. Define the forward market.4. Explain how the O'Hare Sports Export Company is exposed toexchange rate risk and how it could use the forward market to hedgethis risk.*Please answer in DETAIL, thank you!*