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Compute exchange rate exposure-stover corporation

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Reference no: EM132953096

Stover Corporation, a U.S. based importer, makes a purchase of crystal glassware from a firm in Switzerland for 66,600 Swiss francs, or $40,000, at the spot rate of 1.665 francs per dollar. The terms of the purchase are net 90 days, and the U.S. firm wants to cover this trade payable with a forward market hedge to eliminate its exchange rate risk. Suppose the firm completes a forward hedge at the 90-day forward rate of 1.682 francs. If the spot rate in 90 days later is actually 1.695 francs, how much will the U.S. firm have saved or lost in U.S. dollars by hedging its exchange rate exposure?

Reference no: EM132953096

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