SALEM Manufacturing

Considering the case of Salem manufacturing company, it is hard to choose among the options of remaining unhedged, hedge in the forward market, hedge in the money market or hedge in the options market. But a careful study of the case can optimize these options and bring us to the right decision. Considering the Forward marketing hedge would not really be appropriate for this context as this is considered to be an open or uncovered hedge and itдЫЄs success depends on the precision of prediction of the future exchange rates. Though the SalemдЫЄs foreign exchange advisory service forecasts that the spot rate in those months of financial transaction will be $1.56 per British pound, this may not hold good at that time. Since Salem is expecting a minimum acceptable margin sale price of