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Lockheed Martin just signed a contract to sell an F-16 aircraft to Singapore Singapore will be billed 27 million payable in Singapore dollars in one
Lockheed Martin just signed a contract to sell an F-16 aircraft to Singapore Singapore will be billed 27 million payable in Singapore dollars in one year. The current spot exchange rate is SGD1.36/USD and the one year forward rate is SGD1.38/USD. The annual interest rate is 3.3 percent in the United States and 4.3 percent in Singapore. Lockheed Martin is concerned with the volatile exchange rate and would like to hedge the risk. It is considering two hedging alternatives: sell the Singapore dollar proceeds from the sale forward or borrow Singapore dollars against the Singapore dollar receivable. Which of the following statements is CORRECT? O Lockheed Martin can get about $100000 more by borrowing Singapore dollars against the receivable O Lockheed Martin can get about $100000 more by using forward hedging O Lockheed Martin can get about $900000 more by using forward hedging O Lockheed Martin can get about $900000 more by borrowing Singapore dollars against the receivable
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