Currencies – U.S. dollar foreign-exchange rates. May 5, 2011 Country/currency………..in US$…………

Currencies – U.S. dollar foreign-exchange rates. May 5, 2011

Country/currency………..in US$…………..per US$

British Pound……………….1.5347…………….0.6516

Norwegian Kroner……….0.1690……………..5.9173

Thai Baht……………………..0.0310……………..32.250

Mr. Charles imports light bulbs from Norway to the United States. He has a contract to purchase from a Norwegian firm 10,000 light bulbs that he plans to sell in Chicago in 30 days. Assuming that futures trading exists between U.S. dollars and Norwegian Kroner, how can Mr. Charles use such a market to hedge foreign currency risk? a.

Contract to sell Kroner at an agreed upon price in 30 days b.

Contract to sell US Dollars at an agreed upon price in 30 days c.

Contract to buy Kroner at an agreed upon price in 30 days d.

Futures contracts cannot be used to hedge in this circumstance e.

Contract to buy US Dollars at an agreed upon price in 30 days

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