HEDGING RECEIVABLES EXAMPLE

Ganadoa U.S.-based companyhas concluded another large sale of telecommunications equipment to Regency (U.K.). Total payment of 3,100,000 is due in 90 days. Maria Gonzalez, Ganados CFO, has also learned that Ganado will only be able to borrow in the United Kingdom at 13.363% per annum (due to credit concerns of the British banks). Given the exchange rates and interest rates below, compare alternate ways below that Ganado might hedge its foreign exchange transaction exposure. Assume a360-day financial year.

90-day A/R in pounds	3,100,000.00
Current spot rate ($/pound)	1.7667
90-day forward rate ($/pound)	1.7483
U.S. dollar investment rate	6.827%
U.S. dollar borrowing rate	8.052%
U.K. investment interest rate	9.459%
U.K. borrowing interest rate	13.363%
Trident's WACC	11.439%
Expected spot rate in 90 days ($/pound)	1.7939
Put options on the British pound:
Strike price ($/pound)	1.74
Put option premium	1.5%

1. How much in U.S. dollars will Ganado receive in 90 days without a hedge if the expected spot rate in 90 days is the same as the current spot rate of $1.7667/? The 90-day forward rate of $1.7483/? The expected spot rate of $1.7939/?

$5,476,770, $5,419,730, and $5,561,090, respectively.

2. How much in U.S. dollars will Ganado receive in 90 days with a forward market hedge?

$5,419,730

3. How much in U.S. dollars will Ganado receive in 90 days with a money market hedge?

Ganado will borrow GBP and have the loan repaid with the receivable.

Answers are there but i can't figure out how to figure it out.