Please use this information to answer the question below: A US firm's expected Accounts Receivables in Euro Zone due in 1 year Current Spot Rate (SR) for EUR Annual interest rate in US (Rh) Annual interest rate in Euro Zone (Rf) EUR 15,000,000 USD 1.25 5% 12%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Please use this information to answer the question below:
A US firm's expected Accounts
Receivables in Euro Zone due in 1
year
Current Spot Rate (SR) for EUR
Annual interest rate in US (Rh)
Annual interest rate in Euro Zone
(Rf)
OEUR 13,392,857
O USD 17,578,125
EUR 15,000,000
USD 1.25
5%
If the US firm wants to set up a money market hedge for their EUR receivables, today it should invest:
EUR 18,750,000
USD 16,741,071
12%
Transcribed Image Text:Please use this information to answer the question below: A US firm's expected Accounts Receivables in Euro Zone due in 1 year Current Spot Rate (SR) for EUR Annual interest rate in US (Rh) Annual interest rate in Euro Zone (Rf) OEUR 13,392,857 O USD 17,578,125 EUR 15,000,000 USD 1.25 5% If the US firm wants to set up a money market hedge for their EUR receivables, today it should invest: EUR 18,750,000 USD 16,741,071 12%
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