【正确答案】The current dollar value of the future euro receipt = €1,200,000/4·2080 = $285,171 If a forward contract is taken out, PZK Co can lock into the six-month forward exchange rate of 4·2606 euros per dollar. Future dollar value using the forward contract = €1,200,000/4·2606 = $281,651 Loss using the forward contract = 285,171 – 281,651 = $3,520 If PZK Co chooses not to hedge the future euro receipt, it will be able to exchange the euros for dollars at the future spot exchange rate prevailing when the payment is made. This future spot exchange rate may give a better or worse dollar value than using the six-month forward exchange rate. At the current time, PZK Co may prefer the certainty offered by the forward exchange contract to the uncertainty of leaving the future euro receipt unhedged. In addition, the forward exchange rate is an unbiased estimator of the future spot exchange rate.

【正确答案】The implied interest rate in the foreign country can be calculated using interest rate parity.

【正确答案】One of the simplest ways for PZK Co to avoiding exchange rate risk is to invoice in its home currency, which passes the exchange rate risk on to the foreign customer, who must effectively find the dollars with which to make the payment. This strategy may not be commercially viable, however, since the company’s foreign customers will not want to take on the exchange rate risk. They will instead transfer their business to those competitors of PZK Co who invoice in the foreign currency and who therefore shoulder the exchange rate risk. If PZK Co is concerned about exchange rate risk, it will need to consider other hedging methods. For example, if the company regularly receives receipts and makes payments in euros, it could open a bank account denominated in euros.