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Question 3c
PZK 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 PZK 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:
(c) Discuss whether PZK Co should avoid exchange rate risk by invoicing foreign customers in dollars. (4 marks)