3, IBM has sold an order of computer to a Canadian bank for C$1,000,000. months. Although IBM does not usually worry about foreign exchange risk on Canad would like you to explain what alternatives for hedging exist and their costs in order to help price future sales correctly Payment is due in three ian sales it The following data are available: Interest rate for borrowing or investing in U.S.A Interest rate for borrowing or investing in Canada Spot rate: Three-month forward rate: Put option on C$1,000,000 at exercise price of C$1.2000, and a 3% premium IBM's cost of capital 12% 9% per annum 12% per annum C$1.2000/s C$1.2100/$ What are the costs of each alternative? Show your calculations. What is the breakeven reinvestment rate when comparing forward and money market alternatives? Show your calculations. At what exchange rate option hedge is better than money market hedge? Show your calculations. a. b. c