Also Assume That a U

question 51

Multiple Choice

$$\begin{array} { l l r } \text { U.S. deposit rate for 1 year } & = & 11 \% \\\text { U.S. borrowing rate for 1 year } & = & 12 \% \\\text { New Zealand deposit rate for 1 year } & = & 8 \% \\\text { New Zealand borrowing rate for 1 year } & = & 10 \% \\\text { New Zealand dollar forward rate for 1 year } & = & \$ .40 \\\text { New Zealand dollar spot rate } & = & \$ .39\end{array}$$
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:

Empirical Evidence

Information that is acquired by observation or experimentation, serving as a basis for knowledge or validation.

Wage Differences

Variations in compensation received by individuals for their labor, often influenced by factors such as skill level, experience, education, and geographic location.

Ability

Ability refers to the capacity or competence to perform a task or job effectively.

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The amount of physical or mental energy put into a task or activity.