Firm face exchange risk


A U.S. firm purchase raw material on credit and has to pay ¥10 million three months from now. The spot exchange rate is ¥95/$ and the forward rate is ¥96/$. Is the yen selling at a forward premium or discount, related to the dollar? Does the firm face exchange risk? Would you suggest that they buy now or later?

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Finance Basics: Firm face exchange risk
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