Money market hedging

Hi John, Can you pls help me with the q below - BPP q 92.5 revision kit A US company owes a European company €3,5m due to be paid in 3 maths. The spot exchange rate is $1.96:€1 currently. Annual interest rates: Borrowing Deposit US 8%. 3% Europe 5%. 1% What will be the equivalent US $ value of the payment using a money market hedge? The answer in the kit is very confusing for me: The US company should borrow US$ immediately and send it to Europe. It should be left on deposit in € for 3 mths then used to pay the supplier. The amount to put on deposit today =€ 3.5m x 1/(1+(0.01/4))=€3,491,272 This will cost €3,491,272x$2=$6,982,544 today. Assuming this to be borrowed in US$, the liability in 3 mths will be $6,983,544 x (1+(0.08/4))=$7,122,195 So it starts of by saying they should borrow and put on the deposit where as the calculation is done the other way around? Would really appreciate your help. Thank you in advance. Regards, Agnes