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please write the complete answer Question 5 (7 marks) Alcoa, a U.S. firm, has signed a contract to - chase goods from a manufacturer in
please write the complete answer Question 5 (7 marks) Alcoa, a U.S. firm, has signed a contract to - chase goods from a manufacturer in Germany for 5,000,000. The purchase was made ir following market quotes are availabls The spot exchange rate is $. The six-month forward rate is $1.21 per The Euro zone 6 -month borrowing rate is 7% The Euro zone 6-month deposit rate is 5% The U.S. 6-month borrowing rate is 6 ? with payment due six months later in December. The The U.S. 6-month deposit rate is 4% (a) Calculate the six-month forworn ? 0,833%pro (b) If Alcoa chooses to hedig. available rates, what will be payable in six months? Shov wiscount for euros. Show your calculations. (2 marks) (c) If Alcoa chooses to hedge its transaction exposure in the money market at the available rates, what will be the required amount in dollars to pay off the accounts payable in six months? Explain the steps and show calculations to support your answer. Would Alcoa be better off using a forward hedge or a money market hedge
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