View the step-by-step solution to:


A US firm has net receivables of 500,000 CAD in three-month's time as compensation for work undertaken.


current spot rate is USD/CAD 0.9772/0.9737

Interest rates in Canada are currently 1.5% for investing and 4% for borrowing

U.S interest rates are 0.5% for investing and 2% for borrowing

all interest rates are stated as nominal annual terms

The U.S firm wishes to implement a money market hedge

a) in which currency should the firm invest in and which should it borrow ?

b) how much should they invest ?

c) how much should they borrow ?

d) what will the future asset be from the investment made ?

e) including the hedge what will be the effective rate of exchange (USD/CAD) ?

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.


Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes