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Question 1 Assume that you will receive SGD60,000 in 60 days. Assume the following interest rates: Singapore Malaysia 360-day borrowing rate 3.57% 4.78% 360-day deposit

Question 1

Assume that you will receive SGD60,000 in 60 days. Assume the following interest rates:

Singapore Malaysia

360-day borrowing rate 3.57% 4.78%

360-day deposit rate 1.59% 2.58%

Assume the forward rate of the RM is $0.335 and the spot rate of the RM is $0.321. You have a choice of using forward or money market hedging. Which would be a better hedging method? Show all your workings.

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