Mara Gonzlez y Trident has concluded another large sale of telecommunications equipment to Regency (United Kingdom). Full

María González y Trident has concluded another large sale of telecommunications equipment to Regency (United Kingdom). Full payment of £3,000,000 is due in 90 days. María González has also learned that Trident can only borrow in the United Kingdom at 14% per year. Given the following exchange rates and interest rates, which transaction exposure hedge is now in Trident's best interest?

Assumption	Values
A/R 90 days in pounds	3,000,000 pounds
Spot rate, US$ per pound ($/pounds)	$1.7620
90-day forward rate, US$ per pound ($/pound)	1.7550
Investment rate in US dollars for 3 months	6%
US dollar 3 month loan rate	8%
3 month UK investment rate	8%
UK 3 month loan interest rate	14%
Put Option on Sterling: Stike Rates, US$/Pound ($/Pound)
Strike Rate ($/pounds)	$1.75
Put Option Premium	1,5%
Strike Rate ($/pounds)	$1.71
Put Option Premium	1%
WACC de Trident	12%
Expected spot exchange rate for María González in 90-day US$ per pound ($/pound)	$1.785

Answer rating: 100% (QA)

To determine the transaction exposure hedge that is in Tridents best interest we need to compare the ... View the full answer