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Question
A U.S. importer has to pay SKr1 million to a Swedish firm in 60 days. The current spot rate is $0.5 per Swedish krona, and the 60-day forward rate is $0.65. Bob forecasts that the spot rate in 60 days will be $0.45. Jane forecasts that the spot rate will be $0.85 in 60 days. The actual spot rate in 60 days turns out to be $0.68. If the U.S. importer believes Janes forecast, it would:
a. buy SKr in the forward market at $0.65.
b. wait and buy SKr 60 days later at $0.68.
c. buy SKr now at $0.68 and let it sit in the companys safe.
d. wait and buy SKr in the forward market 60 days later at $0.65.
Answer
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