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Red River Inc. of Atlanta purchased computer equipment from Sydney Tech. of Australia for AS10,000,000...

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Red River Inc. of Atlanta purchased computer equipment from Sydney Tech. of Australia for AS10,000,000 with payment due in 3 months. The forecasting department of the firm expects the spot rate in three months to be $.7615/AS The following quotes are available: Three month investment interest rate on US$ 1.00% per annum Loan rate on US$ 4.00% per annum 2.25% per annum 5.00% per annum Three month investment interest rate on A$ Loan rate on AS Spot exchange rate Three month forward rate Three month call option on A$10,000,000 at Bid $.7650/AS Ask $.7658/AS Bid $.7604/AS Ask S.7618/AS an exercise price of $.7700/A$ and a 2% of spot premium. Red River cost of capital is 12% and it wishes to minimize the dollar cost of this payable. The CFO has informed your department that the company is currently in a low cash position and if a money market hedge is used, a U.S. dollar loan would be necessary. However, the option premium should be carried forward at the cost of capital 1. (12 points) What are the costs from the money market hedge

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