Question
A U.S. firm sells merchandise today to a British company for 100,000. The current exchange rate is $1.38/, the account is payable in three months,
A U.S. firm sells merchandise today to a British company for £100,000. The current exchange rate is $1.38/£, the account is payable in three months, and the firm chooses to hedge by borrowing £98,765.43 today and exchanging the proceeds today for dollars; the loan will be paid back with the £100,000 accounts receivable (money market hedge).
If Husky converted the borrowed pounds into dollars today and invested that amount at its WACC of 6% (1.5% for 90 days), how much much money in U.S. dollars will Husky Sporting Goods Company have in 90 days?
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Investments
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
9th Edition
73530700, 978-0073530703
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