Question: Please use the following information to answer the next question: A US firm's Accounts Receivables (from UK) due in 1 year is: GBP 5,000,000

Please use the following information to answer the next question: A US

Please use the following information to answer the next question: A US firm's Accounts Receivables (from UK) due in 1 year is: GBP 5,000,000 Current Spot rate for GBP is: $2.00 Annual interest rate in US is: 5% Annual interest rate in UK is: 8% I-year Forward rate for GBP is: $1.91 Suppose the firm wants to set up a money market hedge to turn their receivables into USD when it is due. Today, the firm needs to: O Borrow GBP from UK bank, sell GBP for USD at current spot rate, invest USD in US bank. O Borrow USD from US bank, sell GBP for USD at current spot rate, invest GBP in UK bank. Borrow USD from US bank, buy GBP with USD at current spot rate, invest GBP in UK bank. Borrow GBP from UK bank, buy USD with GBP at current spot rate, invest USD in US bank.

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