(ii) What will occur if the Malaysia importer does not hedge and the spot rate of the pound in 3 months is RMIBIEI'? {5 marks) Malaysia importer hedge forward contract: ' Current Spot Rate: 1 pound = RM1.70 20,000 pounds = R_Ml.70 x 20,000 = RM36,000 3month Forward Rate: 1 pound = W135 20,000 pounds 2 RM1.75 x 20,000 = RM35,000 Malaysia importer not hedge forward contract: Spot Rate in 3 months 1 pound = RM1.80 x 20,000 = RM36,000 RM34,000 Different between Spot Rate in 3 months and Current Spot Rate RM35,000 RM34,000 = RM2,000 Different between Spot Rate in 3 months 87; 3 months Forward Rate RM35,000 RM35,000 = RM1,000 The importer in Malaysia would have to pay RM36,000 instead of RM34,000 now to get 20,000 pounds or RM35,000 for the forward contract. Which means they will have to pay extra RM1,000 or RM2,000 to get 20,000 pounds when they do not hedge