Altermark Co., a Canadian-based company, has ordered sufficient materials from the U.S. supplier, Steltra Co., which cost C$500,000 with one year ahead of the delivery date. Assume that Altermark Co. expects to pay to Steltra Co. C$500,000 in one year. The existing spot rate of the Canadian dollar is $.70. The one-year forward rate of the Canadian dollar is $.72. The probability distribution for the future spot rate in one year is given as follows:

Future Spot Rate ($0.71, $0.74, $0.78) Probability 20%, 50% and 30%. Assume the following money market rates: for U.S. and Canada Deposit rate 7% and 6% , Borrowing rate 9% and 8% Given this information, determine whether a forward hedge or money market hedge would be most appropriate for Steltra Co. Then compare the most appropriate hedge to an unhedged strategy and decide whether Steltra Co. should hedge its position.