c. Imagine a world where there are only two countries: your home country and a...
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c. Imagine a world where there are only two countries: your home country and a foreign country. Your company operates only in your home country. However, you are afraid that changes in the exchange rate HC/FC will affect the future value of your company. Moreover, the state of the economy is likely to also affect the future value of your company. REQUIRED: i. Report and discuss a mathematical representation for the future value of the company that can account for changes in the exchange rate and also the state of the economy. [7 marks] ii. Explain how one could easily hedge the future value of the company using forward contracts. [5 marks] iii. Discuss whether your company can completely eliminate the uncertainty about future value using forward contracts. [5 marks]
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