>> Financial Management
You are expecting to receive 10M Euros 3-months from now. The interest rates are 3% in the US and 5% in Germany. Current spot exchange rate: $1.20/Euro and 3-month Forward rates: $1.15/Euro.
a. How much $ will you have 3-months from now if you hedge through covered interest arbitrage?
b. How much will you have if you hedge through forward contract?