Question 2 Remake plc is a HK company that imports materials from Thailand. These transactions are usually settled in US dollars however they have recently agreed to import a consignment from a new supplier at a price of Thai Baht 7,500,000 on the basis of a 3 month credit period. Their bank has advised them that is likely that there will be some volatility in the exchange rate over the next six months and estimates that it could vary between Thai Baht /HK $ 4.02-4.26 Other information available: HK inflation rate Current spot rated 3-month forward rate Thailand deposit rate HK deposit rate 5%e Baht/HK$ 4.02 - 4.084 Baht/HK$ 4.06 - 4.132 4.0%e 3.0% ttttt Required: a) Calculate which of the following two forex strategies would be most beneficial to Remake plc (assume any funds required are available): 2 (0) (ii) A forward hedge A money market hedge which involved depositing funds in a Thai bank (8 marks) b) Because of the effort and cost involved in hedging foreign currency transactions the Managing Director has asked you to outline the advantages and disadvantages of: 0 Not entering into a hedging agreement for the above transaction. (ii) Negotiating to have the consignment invoiced in HK dollars. (10 marks) c) Using the theory of Purchasing Power Parity what do the above forward rates tell us about expected inflation in Thailand? (2 marks) TOTAL (20 marks)