An American firm has a liability of 100,000 on account of purchases from a British supplier,...

 

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An American firm has a liability of £100,000 on account of purchases from a British supplier, which is payable after 90 days. The 90-day money market rates in the US and UK are 1.5 percent for lending and 2.0 percent for borrowing. What steps should the American firm take to do a money market hedge? An American firm has a liability of £100,000 on account of purchases from a British supplier, which is payable after 90 days. The 90-day money market rates in the US and UK are 1.5 percent for lending and 2.0 percent for borrowing. What steps should the American firm take to do a money market hedge?

Answer rating: 100% (QA)

A money market hedge is a way to eliminate exchange rate risk when you need to pay for an in... View the full answer