Question 2 Ramsey Limited has today received a 300,000 order from one of its German customers and it has granted a trade credit period of 3 months. You have ascertained the following current market information: Foreign Exchange Market Bid Offer /E spot 1.1535 1.1545 / 3 month forward 65 premium 55 premium Money Market Deposit Rate Borrowing Rate United Kingdom 1.0% 1.2% Eurozone 0.6% 0.8% Required: (a) Using the above information, provide calculations and advise the company whether it should hedge its foreign exchange transaction risk by using a forward contract or a money market hedge. (8 marks) Compare and contrast the use of currency forwards and currency futures as hedging instruments for foreign exchange transaction risk. (b) (12 marks)