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, standard terms for the toy industry in Europe. Mattel’s treasury team has collected the following currency and market quotes. 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.

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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%