1. Your firm is a U.S.-based importer. You have bought er -based importer. You have bought 1,000,000 worth of toys from an Italian firm. Payment to the Italian firm (in ) is due in Italian firm (in ) is due in 1 year. Your firm wants to hedge yea exchange rate is $1.30/ . one-year interest is 29% in the U.S. and 4% in the euro zone. The spot a) Consider the money market hedge. value of the payable in euros.(20points) i) Figure out the present value of the payable other words, do you need to borrow or invest in Figure out your action. In other words, do you need the Eurozone now? (20points) iii) Figure out the future value of the payable in dollars. (30points) b) Consider the forward market hedge. What is an appropriate forward exchange rate for the euro? (20points)