Question
1) Assume the following information: U.S. deposit rate for 1 year= 11% U.S. borrowing rate for...
1) Assume the following information:
U.S. deposit rate for 1 year= 11%
U.S. borrowing rate for 1 year = 12%
New Zealand deposit rate for 1 year =8%
New Zealand borrowing rate for 1 year = 10%
New Zealand dollar forward rate for 1 year= $.40/NZ$
New Zealand dollar spot rate = $.39/NZ$
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?
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