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Shift 4. A U.S. company has sold thousands of laptop computers to a German financial institution, and the invoice price of 200,000 is payable in
Shift 4. A U.S. company has sold thousands of laptop computers to a German financial institution, and the invoice price of 200,000 is payable in a year. Currently, the spot exchange rate is 0.80/$. The money market interest rate is 5 percent per annum in the U.S. and 4 percent per annum in Germany. The management of the U.S. company decides to use the money market hedge to deal with this Euro account receivable. Explain the process of a money market hedge and compute the dollar receipt of the euro receivable. (20 points) (You do not have separate borrowing and investing rates here; only one rate per country)
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