Question
ssume the following information: 1-year U.S. interest rate 4% 1-year Israeli interest rate 3% 1-year forward rate of Israeli New Shekel (ILS) $.400 Spot rate
ssume the following information:
| 1-year U.S. interest rate | 4% |
| 1-year Israeli interest rate | 3% |
| 1-year forward rate of Israeli New Shekel (ILS) | $.400 |
| Spot rate of Israeli New Shekel (ILS) | $.404 |
Assume that the Bornfree Inc. in the United States will need 300,000 Israeli New Shekel (ILS) in 1 year. It wants to hedge this payables position.
Would it be better off using a forward hedge or a money market hedge?
Substantiate your answer with estimated costs for each type of hedge.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
International Finance Discussion Papers The Information Content Of High Frequency Data For Estimating Equity Return Models And Forecasting Risk
Authors: United States Federal Reserve Board, Dobrislav P. Dobrev, Pawel J. Szerszen
1st Edition
1288724810, 9781288724819
