Question: You work for a U.S.-based firm that is considering a project with Indias government. If your firm accepts the project, your firm will receive a
You work for a U.S.-based firm that is considering a project with Indias government. If your firm accepts the project, your firm will receive a single cash flow of 100 million Indian rupees in three years. The spot rate of the Indian rupee is currently $0.013. The annualized interest rate for a 3-year period is 2% in the U.S. and 10% in India. If interest rate parity holds and your firm plans to hedge the cash flow with a forward contract, what is the dollar amount of the cash flow that your firm will receive in three years if it accepts this project?
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