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U.S. Treasury rates are 2% while U.K. rates are 4%. The spot rate is $1.25/. A U.S. bank is charging 5% for borrowers. A U.K.

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U.S. Treasury rates are 2% while U.K. rates are 4%. The spot rate is $1.25/. A U.S. bank is charging 5% for borrowers. A U.K. bank is charging 6% for borrowers. What is the effective exchange rate with a money market hedge if you owe 10 million? A. $1.2260/f B. $1.2028/f C. $1.2620/f D. $1.2347/f

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