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Hi John, can you kindly explain me briefly that if a company does or does not hedge it’s foreign currency risk, can it have an effect on share price of a company?
And can we roundfoff 1.645 standard deviations away fro mean to just 1.6 as given in tables?
thanks.
If a company does not hedge the risk, then it does make the company more risky. This can result in the shareholders requiring a higher return because of the risk, and therefore a lower share price.
Yes – no problem rounding off 1.645, but round it to 1.64 (not to 1.6) because you can look up standard deviations to two decimal places on the tables.
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