A Malaysian importer with a 30 million Euros payable in 90 days wants to hedge his exposure. He has the following information:

MYR/ spot rate = RM4.64/.

MYR/ 90 day forward rate = RM4.87/ (your banks quote)

MYR/ 90 day futures rate = RM 4.86/

MYR/ 90 day Call option ex price RM4.86/, @0.03sen per Euro

MYR/ 90 day Put option ex price RM4.86/, @0.025sen per Euro

a) Outline the appropriate hedge strategy for the importer using currency forward, futures and options.

b) What MYR amount is locked-in when currency futures are used?

c) What is the net amount if options are used to hedge?

d) What expectation would justify the use of options?