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Use the following information to calculate the dollar cost of using a money market hedge to hedge 200,000 pounds of payables due in 180 days.
Use the following information to calculate the dollar cost of using a money market hedge to hedge 200,000 pounds of payables due in 180 days. Assume the firm has no excess cash. Assume the spot rate of the pound is $1.91 and the 180day forward rate is $2.00. The British interest rate is 0.07, and the U.S. interest rate is 0.04 over the 180day period.
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