Bradley Machine Corp. expects to need S$500,000 (Singapore dollars) for an accounts payable in one year. The current spot rate of the Singapore dollar is $0.60/S$. The one year forward rate of the Singapore dollar is $0.62/S$. The spot rate in one year is forecasted to be $0.61/S$. The firms WACC is 12% per year.

Assume that one year put options on Singapore dollars are available, with an exercise price of $0.63/S$ and a premium of $0.04/S$. One year call options on Singapore dollars are available with an exercise price of $0.60/S$ and a premium of $0.03/S$. Assume the following money market rates:

U.S. Singapore

Deposit rate 8% 5%

Borrowing rate 9% 6%

Assume that for money market hedges, the firm invests or borrows at the short-term deposit rates given above rather than at their WACC. Given this information, what would be the total cost in USD to Bradley of the S$500,000 if the Call Options Hedge is chosen?

A.

$310,000

B.

$311,428

C.

$305,000

D.

$316,800