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4. Assume the following information 90-day US interest rate 90-day Malaysian interest rate 90-day forward rate Spot rate 4% 3% $0.4 $0.404 Assume that the
4. Assume the following information 90-day US interest rate 90-day Malaysian interest rate 90-day forward rate Spot rate 4% 3% $0.4 $0.404 Assume that the Santa Barbara Co. in the United States will need 300,000 ringgit in 90 days. It wishes to hedge this payable position. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated cost of each hedge. 20
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