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1. Beaker, a US corporation, needs to pay S$ 1,000,000 after 90 days to its supplier in Singapore. Following quotes are current in the market:
1. Beaker, a US corporation, needs to pay S$ 1,000,000 after 90 days to its supplier in Singapore. Following quotes are current in the market: 2.00 percent 2.50 percent US$ 0.6333/S$ US$ 0.6375/S$ 90-day Singapore interest rate 90-day US interest rate Spot exchange rate 90-day forward exchange rate Calls and Put are available with exercise price = the forward rate Assume that the spot rate after 90 days can be US$ 0.6300/S$, US$ 0.6375/S$, or US$ 0.6450/S$ (i) Show the end-of-period cash flows in US$ for the possible future spot rates if Beaker stays unhedged. (ii If Beaker wanted to hedge this cash flow in the forward market, what contract would it need to enter into? Also, show the end-of-period cash flows in US$ for the possible future spot rates if Beaker enters into this forward market hedge (iii If Beaker wanted to hedge this cash flow in the options market, what would it need to do? Also, show the end-of-period cash flows in US$ for the possible future spot rates if Beaker enters into this option market hedge. (iv) If Beaker wanted to hedge this cash flow in the money market, what transactions would it need to enter into? Also, show the end-of-period cash flows in US$ for the possible future spot rates if Beaker enters into this money market hedge
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