15. Maria Gonzalez and Trident (A). Trident-the same U.S.-based company as discussed throughout this chapter, has concluded a second larger sale of telecommunications equipment to Regency (U.K.). Total payment of 3,000,000 is due in 90 days. Maria Gonzalez has also learned that Trident will only be able to borrow in the United Kingdom at 14% per annum (due to credit concerns of the British banks). Given the following exchange rates and interest rates, what transaction exposure hedge is now in Trident's best interest?

Transcribed Image Text:

Spot rate: $1.7620/ Expected spot rate in go days $1.7850/ 90-day forward rate: $1.7550/ go-day dollar deposit rate 6:0% per annum 90-day dollar borrowing rate: 8.0% per annum go-day pound deposit rate 8.0% per annum 90-day pound borrowing rate: 14.0% per annum Trident's WACC 12.0% per annum Scout has also collected data on two specific options as well: Strike Rate Premium 90-day put option on $1.75/E 90-day put option on $1.71/ 1.0%