I’m working on a finance question and need an explanation to help me understand better.
1. Assume a Kenyan importer buys goods from United States for $20,000 with a payment due
in 30 days
2. Assume the spot rate is Ksh. 68 for one US $
3. Assume the Ksh. is expected to depreciate in value relative to the $ (i.e. Exposed net
liability position)
4. Assume that the Kenyan importer enters into a forward contract which stipulate it can buy
US dollars after 30 days at Ksh. 70 per dollar Required The cash liability for the Kenya Company
Requirements: 300 words