Moyes has taken delivery of 50,000 electronic devices from a firm in Malaysia. The seller is in a strong bargaining position and has priced the devices in Malaysian dollars at M$ 12 each.

It has granted Moyes 3 months credit. Malaysian interest rates are 3% per quarter. Moyes has all its money tied up in its operations but could borrow in sterling, its home currency at 4% per quarter if necessary.

Exchange rate :Malaysian dollar per

Spot : 5.4165

Three-month forward= 5.425

A three-month sterling put, Malaysian dollar call currency option with a strike price of M$ 5.425/ for M$ 600,000 is available for a premium of M$ 15,000.

Required:

a) Discuss, with the help of calculations three hedging strategies available to Moyes.

b) Weigh up the advantages and disadvantages of each strategy