On March 27th, 2020, Penticton Brewery entered into an agreement to receive, in one year, some custom machinery from a supplier in Germany costing 1,500,000 Euros. The March 27th, 2020 spot rate is 1 Canadian dollar is worth .66972 Euros. The forward rate for a contract to buy Euros in March 2021 is currently at 1 CAD = .66883 Euros. Current interest rates in Canada are 2.5% and in Germany are 4.0%. Required: 1. Assuming the actual spot rate on March 27th, 2021 is 1 CAD = .67325 Euros and the company does not hedge its foreign exchange risk, how much will they pay, in Canadian dollars, when the purchase is completed? (1 mark) 2. If the company hedges the risk by arranging a forward contract with its bank, how much will it pay at the time the amount is due? (1 marks) 3. If the company hedges its risk by entering a money market hedge, how much money will it pay when the amount is due? Show all steps in your calculation (6 marks) Which of the three foreign exchange options above would you recommend to Penticton Brewery and why? (2 marks) - - table.jpg