1. Forward versus Money Market Hedge on Payables. Assume the following information:

90day U.S. interest rate = 0.04

90day Malaysian interest rate = 0.04

90day forward rate of Malaysian ringgit = $0.400

Spot rate of Malaysian ringgit = $0.404

Assume that the Santigo Co. in the United States will need303,564 ringgit in 90 days. It wishes to hedge this payables position. How much more (or less)would the money market hedge cost than the forward hedge?

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1. Forward versus Money Market Hedge on Receivables. Assume the following information:

180day U.S. interest rate = 0.07

180day British interest rate = 0.09

180day forward rate of British pound = $1.46

Spot rate of British pound = $1.42

Assume that Rockville Corp. from the United States will receive403,000 pounds in 180 days. How much more (or less) would the firm receive in 180 days if it uses a forward hedge instead of a money market hedge?

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