34. (40 points) Assume that Chicken Inc. expects to receive S$1,000,000 in one year. The existing spot rate of the Singapore dollar is $.60. The one-year forward rate of the Singapore dollar is 5.63. Chicken Inc. created a probability distribution for the future spot rate in one year as follows: Future Spot Rate $.59 .63 .67 Probability 20% 50 30 Assume that one-year put options on Singapore dollars are available, with an exercise price of $.64 and a premium of $.04 per unit. One-year call options on Singapore dollars are available with an exercise price of $.62 and a premium of $.04 per unit. Assume the following money market rates: U.S. Deposit rate Borrowing rate 7% 8% Singapore 6% 7% a. Given this information, determine whether a forward hedge, money market hedge, or a currency options hedge would be most appropriate. Then compare the most appropriate hedge to an unhedged strategy, and decide whether Chicken Inc. should hedge its receivables position. b. Assume that Luna Tech Inc. expects to need to pay S$500,000 in one year. Using any relevant information in part (a) of this question, determine whether a forward hedge, a money market hedge, or a currency options hedge would be most appropriate. Then, compare the most appropriate hedge to an unhedged strategy and decide whether Luna Tech Inc. should hedge its payables position. (Assume the company does not have idle cash sitting around) c. Assume IFE holds and one year has passed. Determine the realized spot rate and the real cost of hedging for both companies above. (There are 4 interest rates list above. You can only use two of them for this portion, choose wisely.)