$($Transaction Exposure$)$Trident $$ A U$.$S$.-$based company, has concluded a sale of telecommunications equipment to Regency $($U$.$K$.).$ A total payment of $2,000,000$ is due in $90$ days. Given the following exchange rates and interest rates, the break$-$even investment rate $($for money market hedge$)$ is $\_\_\_\_\_\_\_\_\_\%$ when comparing the forward hedge and the money market hedge. $($Transaction Exposure$)$Trident $-$ A U$.$S$.-$based company, has concluded a sale of

telecommunications equipment to Regency $($U$.$K$.).$ A total payment of $2,000,000$ is due

in $90$ days. Given the following exchange rates and interest rates, the break$-$even

investment rate $($for money market hedge$)$ is $\%$ when comparing the forward

hedge and the money market hedge.

Put options on the British pound: Strike rates,

US$$/$pound $($$$/)$

Maria Gonzalez's expected spot rate in $90$ days, US$

per pound $($$$/)$

Assumptions Value

$90-$day A$/$R in pounds $2,000,000\mathrm{.}00$

Spot rate, US$ per pound $($$$/)$ $$1\mathrm{.}5610$

$90-$day forward rate, US$ per pound $($$$/)$ $$1\mathrm{.}543$

$3-$month U$.$S$.$ dollar investment rate $14\mathrm{.}000\%$

$3-$month U$.$S$.$ dollar borrowing rate $11\mathrm{.}000\%$

$3-$month UK investment interest rate $6\mathrm{.}500\%$

$3-$month UK borrowing interest rate $9\mathrm{.}000\%$

Put options on the British pound: Strike rates, US$$/$pound $($$$/)$

Strike rate $($$$/)$ $$1\mathrm{.}55$

Put option premium $1\mathrm{.}3\%$

Strike rate $($$$/)$ $$1\mathrm{.}54$

Put option premium $1\mathrm{.}2\%$

Strike rate $($$$/)$ $$1\mathrm{.}55$

Call option premium $2\mathrm{.}2\%$

Trident's WACC $14\mathrm{.}000\%$

Maria Gonzalez's expected spot rate in $90$ days, US$ per pound $($$$/)$ $$1\mathrm{.}5431$