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Please can someone help me in Financial Risk Management The current exchange rate is...

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Finance

Please can someone help me in Financial Risk Management

The current exchange rate is $1.10/. The 1-year forward is $1.15/. The interest rate in Europe is 2%. The interest rate in the USA is 5%.

Is this possible? What is the underlying concept of this question? Why might this company prefer to hedge this risk with options rather than forward contracts?

THANK YOU !

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