Question: Compaq Computer has 1 million payable that it expects to pay in one year. Suppose the interest rate on pounds is 15% and the spot

Compaq Computer has 1 million payable that it expects to pay in one year. Suppose the interest rate on pounds is 15% and the spot exchange rate is 1.5$/. How could Compaq protect this payable using a money market hedge?

a) Borrow 1 million pounds today.

b) Borrow $1,500,000 today

c) Borrow 869,565 pounds today.

d) Borrow $1,304,348 today

e) None of the above.

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