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Question 9 Please use the following information to answer the question below: Suppose the firm wants to set up a money market hedge to meet
Question
Please use the following information to answer the question below:
Suppose the firm wants to set up a money market hedge to meet their payables in USD when it is due. Today, the firm needs to:
Borrow GBP from UK bank, buy USD with GBP at current spot rate, invest USD in US bank.
Borrow USD from US bank, sell GBP for USD at current spot rate, invest GBP in UK bank.
Borrow GBP from UK bank, sell GBP for USD at current spot rate, invest USD in US bank.
Borrow USD from US bank, buy GBP with USD at current spot rate, invest GBP in UK bank.
Question
Please use the following information to answer the question below:
Suppose the firm wants to set up a money market hedge to meet their payables in USD in one year. Today, the firm needs to borrow
and invest
GBP ; USD
USD ; GBP
GBP ; USD
USD ; GBP
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