You are a U.S. importer and just placed an order of antiques worth £100,000 from a U.K supplier. You owe £100,000 to the U.K seller in one year. You are concerned about the dollar cost of this purchase in one year and decide to hedge your exchange rate risk using money market hedge. The current spot exchange rate is $1.40/£, and the forward exchange rate is $1.35/£. The U.S. interest rate is 2.00%, and the U.K. interest rate is 4.00%. What will be the total dollar cost of this purchase in one year with money market hedge? Enter only the numeric portion of your answer.
You are a U.S. importer and just placed an order of antiques worth £100,000 from a U.K supplier. You owe £100,000 to the U.K seller in one year. You are concerned about the dollar cost of this purchase in one year and decide to hedge your exchange rate risk using money market hedge. The current spot exchange rate is $1.40/£, and the forward exchange rate is $1.35/£. The U.S. interest rate is 2.00%, and the U.K. interest rate is 4.00%. What will be the total dollar cost of this purchase in one year with money market hedge? Enter only the numeric portion of your answer.
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
Section: Chapter Questions
Problem 1PS
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You are a U.S. importer and just placed an order of antiques worth £100,000 from a U.K supplier. You owe £100,000 to the U.K seller in one year. You are concerned about the dollar cost of this purchase in one year and decide to hedge your exchange rate risk using
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