KZP Co, whose home currency is the dollar, trades regularly with customers in a number of different countries. The compa

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Kzp Co Whose Home Currency Is The Dollar Trades Regularly With Customers In A Number Of Different Countries The Compa 1 (103.9 KiB) Viewed 38 times

KZP Co, whose home currency is the dollar, trades regularly with customers in a number of different countries. The company expects to receive €1,200,000 in six months' time from a foreign customer. Current exchange rates in the home country of KZP Co are as follows: Spot exchange rate: 4.1780-4-2080 euros per $ Six-month forward exchange rate: 4-2302-4:2606 euros per $ Twelve-month forward exchange rate: 4.2825-4-3132 euros per $ Required: Calculate the loss or gain compared to its current dollar value which KZP Co will incur by taking out a forward exchange contract on the future euro receipt, and explain why taking out a forward exchange contract may be preferred by KZP Co to not hedging the future euro receipt. (7 marks)