Comparison of techniques for hedging payables. SMU Ltd has future receivables of NZ$4,000,000 (New Zealand dollars) in
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Comparison of techniques for hedging payables. SMU Ltd has future receivables of NZ$4,000,000 (New Zealand dollars) in one year. It must decide whether to use options or a money market hedge to hedge this position. Use any of the following information to make the decision. Verify your answer by determining the estimate
(or probability distribution) of NZ dollar revenue to be received in one year for each type of hedge.
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