Unformatted text preview: the current one-month forward rate is $1.25/ euro; an estimate for the spot rate in one month is given to Barry as $1.26/euro; the appropriate one-month rate for various considerations are: .3% risk-free rate, .4% for the estimate of WV’s dividend, .8% for estimate of the future spot rate and .05% that the contract assigning the dividends to Barry will be broken. Should Barry accept Richard’s offer. Explain. If Barry felt he had no choice but to take the offer, should he hedge or not? Explain....
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- Winter '07
- Finance, Dividend, Spot price, one-month forward rate, appropriate one-month rate, International Security Problem