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Suppose 180-day interest rates are 4% per annum in the US and 2.5% per annum in Germany, and that the spot exchange rate is $1.25/.
Suppose 180-day interest rates are 4% per annum in the US and 2.5% per annum in Germany, and that the spot exchange rate is $1.25/. The 180-day forward price is $1.29/. Suppose you owe 10,000,000 in 180 days. Describe two ways to hedge this FX risk and show which method will cost you fewer dollars to pay this obligation on day 180. What are the necessary transactions to hedge with your preferred method
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