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Money market hedge or forward market hedge

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Reference no: EM133067916

Suppose that your firm exports semiconductors to Germany for €1,000,000 receivable in one vear. The annual interest rate in the U.S. is 6% and 8% in Germany. The spot exchange rate is $1.60/€ and the forward exchange rate, with one-year maturity, is $1.65/€. Explain whether your firm should use a money market hedge or a forward market hedge.

Reference no: EM133067916

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