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An American firm owes 4,965,803 British Pounds payable in one year. The current spot rate is $1.206/ pound. A UK bank is paying 3.9% on

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An American firm owes 4,965,803 British Pounds payable in one year. The current spot rate is $1.206/ pound. A UK bank is paying 3.9% on deposits or will lend at 4.7%. A US bank is paying 5.0% on deposits or will lend at 6.7%. The firm will hedge this exposure with money market hedging. What is the effective exchange rate? Note: your answer should include 3 decimal places 1.2385 margin of error +/0.01

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