The current spot rate, 90-day forward rate, and your expectations for spot rates in 90 days for Euros (?) are shown in the following table:

Current Spot Rate	90-day Forward Rate	Expected Spot Rate in 90 days
$1.00 = ?0.8297 ?1.00 = $1.2053	$1.00 = ?0.8333 ?1.00 = $1.2000	$1.00 = ?0.8163 to ?0.8602 ?1.00 = $1.1625 to $1.2250

You have sold a numerically-controlled milling machine to an Italian manufacturing company. Your price to cover the cost and profit on this sale is $500,000.00, but in order to win the business in the highly competitive market, you had to agree to price the order in Euros. Based on the current spot rate, you accepted an order price of ?416,600.00 for this sale. You will invoice and receive payment upon delivery of the system in 90 days. If the Euro depreciates to the lower limit of your expected range, your dollar proceeds from the sale will be $484,297.50, which is significantly less than your target price. Interest rates for 90-day loans are 7.56% pa (1.89% for 90 days) in the European money market and 8.40% pa (2.10% for 90 days) in the US money market. What action would you take to protect yourself with a money market hedge?

		Buy Euros forward
		Sell Euros forward
		Borrow Euros in the European money market and use the proceeds to buy dollars.
		Borrow Dollars in the US money market and use the proceeds to buy euros.