(BACKGROUND INFORMATION )

Firm XYZ: 1. Your firm sells goods domestically and abroad.

2. The firm has a payment due in 3 months time worth 400,000 EUR to foreign supplier.

3. A U.S. importer owes the firm 300,000 USD, due in 4 months.

Economic environment: 1. RBA is considering implementing an expansionary monetary policy by lowering the cash rate.

2. Economic growth of your foreign markets, where you export your goods, has declined relative to domestic economic growth.

3. The firm is considering issuing 500,000 USD bonds with a maturity of 1 y

QUESTION 1 what are some of the Hedging strategies: show knowledge of different strategies available in the market

QUESTION 2 Show calculation of hedge/no hedge decisions under different strategies

QUESTION 3 Recommendation: which strategy should you use? Why?