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9. A US-based company just made a sale to a Europcan customer for which you will receive 5,000,000 in 2 years. The current spot rate
9. A US-based company just made a sale to a Europcan customer for which you will receive 5,000,000 in 2 years. The current spot rate is $1.25/. The annual interest rate is 1.0% in the U.S. and 2.0% in Europc. a) (5 points) Using a forward market hodge, (1) indicate whether you should use a long or short forward contract to hodge currency risk, (ii) calculate the no-arbitrage forward price at which you could enter into a forward contract that expires in 2 years (iii) find the value of the account receivable (in dollars) using the forward market hedge (use the price calculated in part (11) Solution: b) (5 points) Do a money market hedge
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