Expected value of forward and money market hedges

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Reference no: EM131937323

Assume that you want to hedge an account receivable of one million euros due in 6 months. The current spot rate is $1.20/. The 180-day forward rate is $1.10/, and WACC is estimated to be 7%. The borrowing rate in Europe is 2.5%, and the lending rate is 2.2%. In the U.S., the borrowing rate is 2.9%, and the lending rate is 2.3%. There are no options available to you for this situation. Calculate the expected value of the forward and the money market hedges and make a recommendation.

Reference no: EM131937323

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