Background:

• The firm imports high quality wool to Britain from foreign suppliers located in Australiaand the New Zealand.
• The firm exports Jewellery to USA from Britain.
• The firm exports designer clothes from Britain to Australia, New Zealand and Singapore.
• The firm has a payment of 8,000,000 AUD due in 3 months to their supplier in Australia, a payment of 6,000,000 NZD due in 2 months to their supplier in New Zealand.
• The firm is due to receive 9,000,000 AUD from their customer in Australia in 2 months, 4,000,000NZD from their customer in New Zealand in 2 months, 700,000 SGD from their customer in Singapore in 1 months, and 9,000,000 USD from their customer in USA in 2 months
• The firm is concerned with the impacts of the potential high inflation rate due to the recent expansionary monetary policy globally in their exporting and importing business

Question: (Design of Hedging strategies and Hedging outcome) (Show Calculation)

Explain the relevance, the effectiveness and the cost of the proposed hedging strategies.

Please calculate and evaluate the outcome if the company's exposure is hedged using the proposed strategies as well as the outcome if the company's exposure is not hedged.

Note: Please consider the effect of the current economic environment on foreign exchange market, demand for exports/imports, supply of exports/imports and other relevant economic indicators, and relate this to how this may impact the firm. Particularly, you need to discuss the potential impacts of high inflation in the relevant countries for the firm on the firm's exportingand importing business