Because it is unlikely she will be able to visit you this year, your wealthy American...
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Because it is unlikely she will be able to visit you this year, your wealthy American aunt wants to send you a present for your birthday. You expect she will give you USD 4813 in 2 months. Having taken this course, you know you can lock in the AUD rate for this USD receivable using a money market hedge. If (annualized) 2-month interest rates in the US are 9.2%, 2-month interest rates in Australia are 2.3%, and the current spot rate is 0.625 USD/AUD, what implied USD/AUD exchange rate can you lock in? Because it is unlikely she will be able to visit you this year, your wealthy American aunt wants to send you a present for your birthday. You expect she will give you USD 4813 in 2 months. Having taken this course, you know you can lock in the AUD rate for this USD receivable using a money market hedge. If (annualized) 2-month interest rates in the US are 9.2%, 2-month interest rates in Australia are 2.3%, and the current spot rate is 0.625 USD/AUD, what implied USD/AUD exchange rate can you lock in?
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