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Use the inturisation tor the foliowing peoblem(s) fisk ansing trom the purchose. To help the firm make a hedging decnion you howe gathered the following

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Use the inturisation tor the foliowing peoblem(s) fisk ansing trom the purchose. To help the firm make a hedging decnion you howe gathered the following information. The spot exchange rate is $1.25040 The sac- month forward rate is $1 22louro CVT's cost of capial s 11\% The Furo zone 6 - month bartowmy rale is 9 th (or 45% for 6 montass) The Euro zone 6 - month lending ento is Twe (ar 35% for 6 monttis) The U.S. 0 - mooth boriowing rate is 8% (or 4% for 6 moniths) The U.S. 6 - month lending rate is 6% (or 35 for 6 months) CVT's tocecast for 6 -month sqot rates in 51 27 weuro Chen budget tite, or the highest acceptabie puichase price for thes proged, is $3,900,000 or $1.30 ouro Reter to instruction 10+. If cVT cheoses to hodgo its transaction exposuie in the forward maket it wil t 6000,000 torwand at a tate of A. buy, 5122 B. sel, et75 C. bus; 5126 0. sete 5122

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