your wealthy American aunt wants to send you a present for your birthday. You expect she...

 

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your wealthy American aunt wants to send you a present for your birthday. You expect she will give you USD 9420 in 3 months. Having taken this course, you know you can lock in the AUD rate for this USD receivable using a money market hedge. (Annualized) 3-month interest rates in the US are 6.2% -6%, and 3-month interest rates in Australia are 2%-1.8%. The current bid-ask spot rates are 1.235-90 AUD/USD. What is the locked in AUD value of this present? your wealthy American aunt wants to send you a present for your birthday. You expect she will give you USD 9420 in 3 months. Having taken this course, you know you can lock in the AUD rate for this USD receivable using a money market hedge. (Annualized) 3-month interest rates in the US are 6.2% -6%, and 3-month interest rates in Australia are 2%-1.8%. The current bid-ask spot rates are 1.235-90 AUD/USD. What is the locked in AUD value of this present?

Answer rating: 100% (QA)

To calculate the lockedin AUD value of the present using a money market hedge we need to consider th... View the full answer