Mattel Toys. Mattel is a U.S.-based company whose sales are roughly two-thirds in dollars (Asia and the Americas) and one-third in euros (Europe).

In September, Mattel delivers a large shipment of toys (primarily Barbies and Hot Wheels) to a major distributor in Antwerp. The receivable, €30 million, is due in 90 days, which is standard terms for the toy industry in Europe. Mattel’s treasury team has collected the following currency and market quotes:

Current spot rate ($/€) $1.4158 Credit Suisse 90-day forward rate ($/€) $1.4172 Barclays 90-day forward rate ($/€) $1.4195 Mattel Toys WACC ($) 9.600%

90-day eurodollar interest rate 4.000%

90-day euro interest rate 3.885%

90-day eurodollar borrowing rate 5.000%

90-day euro borrowing rate 5.000%

The company’s foreign exchange advisors believe the euro will be at about $1.4200/€ in 90 days. Mattel’s management does not use currency options in currency risk management activities. Advise Mattel on which hedging alternative is probably preferable.