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Evaluate the forward hedge

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Reference no: EM133056543

XYZ Corporation in the US has purchased supplies from a company in the UK and the invoice must be paid in GBP in 3 months' time. The amount owed is £5,000,000. We assume that XYZ Corporation can obtain currency from Snoopy Bank and the 3-month forward rate is $1.5532 to 1 GBP. Explain the spot and forward transactions it can enter into in order to settle the money owed for the supplies in 3 months' time. Evaluate the forward hedge if the US$ / GBP spot rate in 3 months' time is $1.65 or $1.45.

Reference no: EM133056543

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