Assume the Following Information

question 1

Multiple Choice

Assume the following information:
U.S.deposit rate for 1 year = 11%
U.S.borrowing rate for 1 year   = 12%
New Zealand deposit rate for 1 year   = 8%
New Zealand borrowing rate for 1 year   = 10%
New Zealand dollar forward rate for 1 year = $.40
New Zealand dollar spot rate   = $.39
Also assume that a U.S.exporter denominates its New Zealand exports in NZ$ and expects to receive NZ$600,000 in 1 year.  You are a consultant for this firm.
Using the information above,what will be the approximate value of these exports in 1 year in U.S.dollars given that the firm executes a money market hedge

• A) $238,584.
• B) $240,000.
• C) $234,000.
• D) $236,127.

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Definitions:

Consider Producing

Evaluating or thinking about creating, manufacturing, or bringing forth goods or products.

Mirror Image Rule

A common law rule that requires, for a valid contractual agreement, that the terms of the offeree’s acceptance adhere exactly to the terms of the offeror’s offer.

Acceptance Terms

Conditions under which an offer can be accepted, forming a binding contract between the offering and accepting parties.

Offer Terms

The specific conditions, including price, duration, and duties, outlined in a proposal to enter into a contract or agreement.