Assume the following information: U.S. deposit rate for 1 year = 11% U.S. borrow

Question

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 =
9%
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? (Points : 1)

Explanation / Answer

$240,000.

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