(3)Consider the following information:

180-day U.S interest rate.8%

180-day UK interest rate....9%

180-day forward rate of Pound Sterling.$1.50

Spot Rate of the Pound Sterling .$1.48

(a)Assume that Sunnyside Corp. based in New York will RECEIVE 500,000 pounds in 180 days. Would it be better-off using a forward hedge or a money market hedge? Explain.

(b)Suppose the Sunnyside Corp. will need one million pounds in 180 days and does not have surplus cash to execute a hedging arrangement, again, determine if it will be more beneficial to use the forward hedge or the money market hedge.