X=3 Suppose that you are a Pakistani-based importer of goods from the United Kingdom....
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X=3
Suppose that you are a Pakistani-based importer of goods from the United Kingdom. You expect the value of the US dollar to increase against the Pakistani Rupee over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 5.5 percent, and the Pakistani risk-free rate is 7.0 percent. These rates are expected to remain unchanged over the next month. The current spot rate is Rs. 16X. A. Indicate whether you should use a long or short forward contract to hedge the currency risk. B. Move forward 10 days. The spot rate is $15X. Interest rates are unchanged. Calculate the value of your forward position
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