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"Assume the following information: Also assume that a U.S. exporter denominates its New Zealand exports in NZ$ and expects to receive NZ$600,000 in 1 year. You are a consultant for this firm. Using the
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"Assume the following information: Also assume that a U.S. exporter denominates its New Zealand exports in NZ$ and expects to receive NZ$600,000 in 1 year. You are a consultant for this firm. Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a money market hedge

User Lew Wei Hao
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Answer and Explanation:

Borrow in New Zealand dollars

600000/1.1 = 545454.5 NZ$

Convert the New Zealand dollars to

USD

545454.5 0.39 = 212727.3 USD

Invest the USD to get

USD US deposit rate

212727.3 1.11 = 236127.3

236127.3 is the value of the exports after 1 year.

User Sadik
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5.4k points
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