Instructions: Show all calculations in detail. No partial credit will be given for just answers.

1. Assume the following information:

U.S. deposit rate for 1 year = 11%

U.S. borrowing rate for 1 year = 12%

New Zealand deposit rate for 1 year = 8%

New Zealand borrowing rate for 1 year = 10%

New Zealand dollar forward rate for 1 year = $.40/NZ$

New Zealand dollar spot rate = $.39/NZ$

Also assume that a U.S. exporter denominates its New Zealand exports in NZ$ and expects to receive NZ$600,000 in 1 year. You are a consultant for this firm.

Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a money market hedge?