International Financial Management Question.

A German rm will make a payment of US$15 million in 91} days. The f'mn calls the bank and obtains the following quotes (with bid-ask spread]: Spot US$26 market: SIIUS$I] = 1.12315 1.1242 99-day forward US$449 market: FauliUSEfE} = 1.1241 1.1249 11.3. money market: ins; = 2.4% 3% Fa. German money market: is = 1.6% 2% p.a. Note: Assume perfect hedge is possible. a) If the [spot] US$11? rate in 911 days were 1.1245, which method, forward hedge on E or money market hedge, should the German rm choose? Find the total amount of E involved in the hedging technique the rm chooses. Be sure to identify it is the total amount of IE received or paid, and describe the transactions taken under different hedging strategies. {111 points] b) At: what US$111? spot. rate would the rm he indifferent between money market hedge and forward badge? {4 points] c) If the firm expects the 99-day USSJE spot rate to be 1.1249, what would the rm do'i'l What kind of risk the rm might face? Explain. {6 points}