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Blades Inc., U.S firm has agreed to sell its product to Regency, EU firm and payment is Euro 2 million. Blades Inc has agreement that
Blades Inc., U.S firm has agreed to sell its product to Regency, EU firm and payment is Euro 2 million. Blades Inc has agreement that the amount will be paid in 30 days. Blades Inc wants to avoid the FX risk by using the US and EU money market. Following information is available to Blades Inc.
Current sport rate = $1.15/euro
EU borrowing rate = 6% annual rate
US investing rate = 5% annual rate
Explain how blades Inc can conduct money market hedge?
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