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An American exporter denominates its Australian exports in AUD and expects to receive AUD 2,000,000 in 1 year. The companys financial manager expects the AUD
An American exporter denominates its Australian exports in AUD and expects to receive AUD 2,000,000 in 1 year. The companys financial manager expects the AUD rate after 1 year to be 1.40. The Firm decides to hedge its receivables.
The USD/AUD Spot rate is 1.35
The USD/AUD Forward rate is 1.38
The AUD Interest rate is 4%
The USD interest rate is 3%
If the firm executes forward hedge and a money market hedge? Which one is more feasible for the company?
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