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2. Forward vs. Money Market Hedge on Payables. Assume the following information: 30-day U.S. interest rate = 2% 30-day Malaysian interest rate =1% 30-day forward
2. Forward vs. Money Market Hedge on Payables. Assume the following information: 30-day U.S. interest rate = 2% 30-day Malaysian interest rate =1% 30-day forward rate of Malaysian ringgit = $.402 Spot rate of Malaysian ringgit = $.405 Assume that the Santa Barbara Co. in the United States will need 800,000 ringgit in 30 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 (20 points). %3D
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