Intro

Bay Area Sports Car is a luxury car dealership importing cars from Europe. The company will need 100,000 euros () in one year to pay its German suppliers.The spot rate is $1.19 per euro and the one-year forward rate is $1.191 per euro. The U.S. interest rate is 5% and the euro interest rate is 4%.

Attempt 1/6 for 10 pts.

Part 1

What amount of euros is required now if the company wants to create a money market hedge (in )?

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Attempt 1/6 for 10 pts.

Part 2

How much should the company borrow now (in $)?

Submit

Attempt 1/6 for 10 pts.

Part 3

What is the total cost of creating a money market hedge, including interest (in $)?