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An Australian firm is due to pay USD 5 0 0 , 0 0 0 in 6 months to a firm in the United States.
An Australian firm is due to pay USD in months to a firm in the United States. The following information is available:
Spot exchange rate AUDUSD
Sixmonth interest rate in Australia per annum
Sixmonth interest rate in the United States per annum
i Calculate the AUD value of the payables under a money market hedge. In doing so clearly outline the steps required to perform the money market hedge.
ii Assuming that uncovered interest parity holds, how much would the importer expect to pay if the position remains unhedged?
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