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(Transaction Exposure)Trident A U.S.-based company, has concluded a sale of telecommunications equipment to Regency (U.K.). A total payment of 2,000,000 is due in 90 days.

(Transaction Exposure)Trident A U.S.-based company, has concluded a sale of telecommunications equipment to Regency (U.K.). A total payment of 2,000,000 is due in 90 days. Given the following exchange rates and interest rates, the break-even investment rate (for money market hedge) is ______% when comparing the forward hedge and the money market hedge.

Assumptions Value
90-day A/R in pounds 2,000,000.00
Spot rate, US$ per pound ($/) $1.5610
90-day forward rate, US$ per pound ($/) $1.5439
3-month U.S. dollar investment rate 5.000%
3-month U.S. dollar borrowing rate 7.000%
3-month UK investment interest rate 6.500%
3-month UK borrowing interest rate 9.000%
Put options on the British pound: Strike rates, US$/pound ($/)
Strike rate ($/) $1.55
Put option premium 1.554%
Strike rate ($/) $1.54
Put option premium 1.54%
Strike rate ($/) $1.55
Call option premium 1.528.%
Trident's WACC 12.000%
Maria Gonzalez's expected spot rate in 90 days, US$ per pound ($/) $1.5431

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