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Eurobusiness Corp. is looking for cross-border acquisition opportunities in the US. They engaged in some preliminary talks with City Circuit Ltd., bidding USD 900 M
| Eurobusiness Corp. is looking for cross-border acquisition opportunities in the US. They engaged in some preliminary talks with City Circuit Ltd., bidding USD 900 M in cash, payable in 6 months. |
| Eurobusiness has enough cash sitting in Andorra, which pays 0,1% interest per month, to close the deal. Currently, the spot exchange rate is 0,91/USD and the six-month forward exchange rate is 0,915/USD. |
| In New York, the money market interest rate is 0,5% for a six-month investment. |
| How would you settle the deal? |
| a. Keep the funds in Andorra and buy USD 900 M forward. |
| b. Buy a certain USD amount spot today and invest the amount in the US for six months so that the maturity value becomes equal to USD 900 M. |
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Financing High Tech Startups Using Productive Signaling To Efficiently Overcome The Liability Of Complexity
Authors: Robin P. G. Tech
1st Edition
331966154X,3319661558
