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Question 3 40 pts Due to the COVID-19 situation, the Fed launched a series of relief packages, the USD is depreciating against other major currencies.
Question 3 40 pts Due to the COVID-19 situation, the Fed launched a series of relief packages, the USD is depreciating against other major currencies. The depreciation of USD creates pressure on US corporations' EURO payable. One corporate customer comes to the bank that you work for to hedge the Euro 1.5 million payable due in 8 months. The following information shows up on your screen: Spot exchange rate: $1.0234/-$1.0256/ US 8-month interest rates are 0.75% for investing and 2.49% for borrowing, EU 8-month interest rates are 0.25% for investing and 1.59% for borrowing, Please remember: Interest rates are quoted as annualized rates. The bank that you work for demands a 0.45% profit margin for all forward contracts. How much is the forward quotation that you will provide to your corporate customer? Edit View Insert Format Tools Table
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