12 Hedging decision on receivables Assume the following information:

180-day Australian interest rate 8%

180-day British interest rate 9%

180-day forward rate of British pound A$1.50 Spot rate of British pound A$1.48 Assume that Riverside Corp. from Australia will receive £400,000 in 180 days. Would it be better off using a forward hedge or a money market hedge?

Substantiate your answer with estimated revenue for each type of hedge.