$1)(6$ pts$)$ Assume that Stevens Point Co$.$ has net payables of $200,000$ Singapore dollars in $90$ days. The spot rate of the S$ is US$$0\mathrm{.}74/1$S$$,$ and the Singapore periodic interest rate is $1\mathrm{.}5\%$ over $90$ days $($annual rate is $6\%$ per year, so periodic rate is $1\mathrm{.}5\%$ per $90$ days$).$ Assume US periodic interest rates of $1\%$ over $90$ days or $($annual rate is $4\%,$ so periodic rate is $1\%$ per $90$ days$).$ If the U$.$S$.$ firm could implement a money market hedge, what is the cost of the payables in US dollars in $90$ days using a money market hedge? Assume borrowing and lending rates are the same for simplicity. Be precise.

$2)(6$ pts$)$ Assume that Vermont Co$.$ has net receivables of $10,000,000$ Mexican pesos in $180$ days. The Mexican periodic interest rate is $5\%$ over $180$ days $(10\%$ annually$),$ and the spot rate of the Mexican peso is $$0\mathrm{.}059/1$ MXN$.$ Assume US periodic interest rates of $2\%$ over $180$ days or $($annual rate is $4\%,$ so periodic rate is $2\%$ per $180$ days$).$ What is the US dollar value of the receivables in $180$ days if the firm uses a money market hedge? Assume borrowing and lending rates are the same for simplicity. Be precise.

$3)(6$ pts$)$ Assume that Loras Corp. imported goods from New Zealand and needs $100,000$ New Zealand dollars $180$ days from now. It is trying to determine whether to hedge this position. Loras has developed the following probability distribution for the New Zealand dollar:

Possible Value of

New Zealand Dollar in $180$ Days Probability

$$\mathrm{.}5610\%$

$\mathrm{.}5810\%$

$\mathrm{.}6020\%$

$\mathrm{.}6425\%$

$\mathrm{.}6620\%$

$\mathrm{.}6815\%$

The $180-$day forward rate of the New Zealand dollar is US$$0\mathrm{.}65/1$NZD$.$ The spot rate of the New Zealand dollar is US$$0\mathrm{.}63/1$NZD$.$ Develop a table showing a feasibility analysis for hedging. That is$,$ determine the possible differences between the costs of hedging versus no hedging. What is the probability that hedging will be more costly to the firm than not hedging?

$4)(3$ pts$)$ If hedging is expected to be more costly than not hedging, why would a firm even consider hedging?

$5)(6$ pts$)$ Forward versus Money Market Hedge on Payables. Assume the following information:

$90$ day U$.$S$.$ interest rate $=1\mathrm{.}1\%$ per $90$ days or $4\mathrm{.}4\%$ per year compounded quarterly

$90$ day Malaysian interest rate $=1\mathrm{.}5\%$ per $90$ days or $6\%$ per year compounded quarterly

Assume borrowing and lending rates are the same for simplicity.

$90$ day forward rate of Malaysian ringgit $=$ $$0\mathrm{.}39/1$MYR

Spot rate of Malaysian ringgit $=$ $$0\mathrm{.}40/1$MYR

Assume that the Santa Barbara Co$.$ in the United States will need $800,000$ ringgit in $90$ days. It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated costs for each type of hedge.

$6)(6$ pts$)$ Forward versus Money Market Hedge on Receivables. Assume the following information:

$180$ day U$.$S$.$ interest rate $=2\mathrm{.}4\%$ per $180$ days or $4\mathrm{.}8\%$ per year compounded semi$-$annually

$180$ day British interest rate $=1\mathrm{.}4\%$ per $180$ days or $2\mathrm{.}8\%$ per year compounded semi$-$annually

$180$ day forward rate of British pound $=$ $$1\mathrm{.}34$

Spot rate of British pound $=$ $$1\mathrm{.}33$

Assume that Riverside Corp. from the United States will receive $200,000$ pounds 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.