Procter and Gambles affiliate in India, P&G India, obtains much of its product line from a Vietnamese company. Because of the shortage of short-term capital in India, payment terms by Indian importers are typically 180 days or longer. Thus, P&G India wishes to hedge a 10 Million Vietnamese Dong payable in 180 days. Although options are not available on the Indian Rupee, forward rates are available against the Vietnamese Dong. Additionally, a common practice in India is for companies like P&G India to work with a currency agent who will, fix the current spot rate in exchange for a 4% fee of total transaction value.

Using the exchange rate and interest rate data given in the table below, recommend a hedging strategy by calculating and comparing the cost of each hedging strategy.

Spot Rate	350 Dong/Rupee
180-day forward rate	320 Dong/Rupee
Expected spot rate in 180 days	320 Dong/Rupee
180-day Rupee investing rate	6.00%
180-day Dong investing rate	2.00%
Currency agents exchange rate fee	4%
P&G Indias cost of borrowing	10.00%