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Assume the following information: 1-year U.S. interest rate 4% 1-year Israeli interest rate 3% 1-year forward rate of Israeli New Shekel (ILS) $.400 Spot rate
Assume the following information: 1-year U.S. interest rate 4% 1-year Israeli interest rate 3% 1-year forward rate of Israeli New Shekel (ILS) $.400 Spot rate of Israeli New Shekel (ILS) $.404 Assume that the Bornfree Inc. in the United States will need 300,000 Israeli New Shekel (ILS) in 1 year. It wants to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated costs for each type of hedge.?
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