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Question 1 A U.S. based company has concluded a large sale of equipment worth 3 million to a U.K. company. Payment terms is due in
Question 1 A U.S. based company has concluded a large sale of equipment worth 3 million to a U.K. company. Payment terms is due in 3 months. Given the following information, 1.7620 1.7850 1.7550 Spot rate, US$ per Expected Spot rate in 3 months, US$ per 3-month forward rate, US$ per US$ investment rate US$ borrowing rate investment rate borrowing rate 12% p.a. 13% p.a. 13% p.a. 14% p.a. a. Determine the type of exposure and, based on the given information, what kind(s) of strategy can be employed. b. Analyse which hedging strategy is in the best interest of the U.S. company? Show your working clearly. . Provide alternative strategy (ies) to hedge this exposure
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