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MC Question 4
Formulae & Tables
FM (F9) Formulae Sheet
You will get this Formula Table at the exam so learn well how to apply it in your FM (F9) Exam
A company whose home currency is the dollar ($) expects to receive 500,000 pesos in six months’ time from a customer in a foreign country. The following interest rates and exchange rates are available to the company:
Spot rate | 15·00 peso per $ | |
Six-month forward rate | 15·30 peso per $ | |
Home country | Foreign country | |
Borrowing interest rate | 4% per year | 8% per year |
Deposit interest rate | 3% per year | 6% per year |
Working to the nearest $100, what is the six-month dollar value of the expected receipt using a money-market hedge?
A. $32,500
B. $33,700
C. $31,800
D. $31,900