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You are the financial manager for Hephaestus Holdings, which is headquartered in the United States. You have received the below spot and interest rates quotes
You are the financial manager for Hephaestus Holdings, which is headquartered in the United States. You have received the below spot and interest rates quotes from your bank: Suppose that Hephaestus Holdings has a payable in CAD in one year's time and they wish to engage in a hedge to lock in their domestic (i.e. U.S dollar) currency equivalent of its value. Hephaestus Holdings intends to achieve this by using their bank's spot rates and money market interest rates in order to create a synthetic forward contract. What is the effective forward exchange rate that Hephaestus Holdings is able to achieve for hedging the USD value of their CAD payable? a. CAD 0.7658/USD b. CAD 0.7551/USD c. CAD 0.7629/USD d. CAD 0.7736/USD e. CAD 0.7891/USD f. CAD 0.8162/USD
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