I’m obviously missing something really simple here:
The problem statement says that the “principal value of the portfolio is currency hedged using a three-month forward contract”. So If they sell forward at the rate of .87PLN = 1LHS, why in the answer key do they have them converting back to PLN at the Spot rate of .80? Shouldn’t they get to convert the principal back at .87?
Like I said, I’m obviously missing something really simple here, it’s 10:00PM on Friday night and I’ve been working since 7:30 AM, maybe time to call it a night. . . . .
If someone can help me out here, I’d be glad to help them on a ridiculous question they have. . . . (after some rest of course. . )