Question
USA needs to PAY 10,000,000 Euros (E) in 252 days ( = .70 yr) to a European supplier. USA is concerned about exchange rate risk
USA needs to PAY 10,000,000 Euros (E) in 252 days ( = .70 yr) to a European supplier. USA is concerned about exchange rate risk on the future US$ cost to meet this E payable. Spot rate today is $1.13 / E
ANNUAL deposit (investing) rate is: Europe = 2.75% ; USA = 6.25%
ANNUAL borrowing rate is: Europe = 4.25% ; USA = 8.4%
What is the Money Market Hedge amount for USA?
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Intermediate Financial Theory
Authors: Jean-Pierre Danthine, John B. Donaldson
2nd Edition
0123693802, 978-0123693808
