Blake Inc Needs €1,000,000 in 30 Days

question 23

Multiple Choice

Blake Inc. needs €1,000,000 in 30 days. It can earn 5 percent annualized on a German security. The current spot rate for the euro is $1.00. Blake can borrow funds in the U.S. at an annualized interest rate of 6 percent. If Blake uses a money market hedge to hedge the payable, what is the cost of implementing the hedge?

• A) $1,000,000.
• B) $1,055,602.
• C) $1,000,830.
• D) $1,045,644.

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Definitions:

Profit-Maximizing

A strategy or approach where a firm's main goal is to achieve the highest profit possible, often by adjusting production levels, prices, or other operational decisions.

Joint Profit

The combined profits of two or more entities or products, often considered in scenarios of cooperation, partnership, or mergers.

Game Theory

A theoretical framework for conceiving social situations among competing players and predicting their outcomes based on the choices of every participant.

Oligopolies

Market structures characterized by a small number of firms dominating the market, leading to limited competition.