Assume the following information:

90day forward rate of Malaysian ringgit = $.400

Spot rate of Malaysian ringgit = $.404

Assume that the Santa Barbara Co. in the United States will need 300,000 ringgit in 90 days. It wishes to hedge this payables position. If the firm uses the forward hedge, how much will it pay out in 90 days.

a.

$50,000

b.

$120,000

c.

$2,650,000

d

None of the options

Suppose that in the case of Santa Barbara Co. in the previous question, the spot rate depreciates in 90 days to $.410 How much would it have paid in U.S. dollars if it hadn't entered a forward contract?

	a.	$500,000
	b.	$123,000
	c.	$50,000
	d.	None of the options