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Appropriate quantitative evidence

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Reference no: EM131061104

Assume that XYZ co. from the United States will receive 400,000 pounds in 180 days. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with appropriate quantitative evidence?

The following assumptions are taken

  • 180-day U.S. interest rate = 4%
  • 180-day British interest rate = 4.5%
  • 180-day forward rate of British pound = $1.70
  • Spot rate of British pound = $1.80

Reference no: EM131061104

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