Magna International (Magna) is a Canadian parts supplier to General Motors (GM) in the US. Magna informed GM of a shipment scheduled to arrive on Jul 15, three months from today. The invoiced amount is USD 45 million due in one year.

CAD/USD spot rate: CAD 1.2617 / USD

12-mo forward rate: CAD 1.2506 / USD

12-mo CAD interest rate: 0.81% (both borrowing and investing)

12-mo USD interest rate: 0.68% (both borrowing and investing)

a. Given the 3-month forward rate, how can Magnas CFO eliminate the uncertainty of CAD funds receive in 3 months? (5 marks)

b. Magnas CFO is considering using a money market hedge. Given the information above, how would this be constructed? (5 marks)

c. Given the spot and 12-mo forward rate, how could Magnas CFO structure a currency risk-sharing arrangement with GE? (5 marks)