QUESTION FOUR Malox Water (pvt) Itd purchased a Drilling Rig from South Africa for R750 000.00, payable in three months. They have enough US dollar cash in his US Nostro account in Zimbabwe, which pays 0.35% interest per month, compounded monthly, to pay for the Rig. Currently, the spot exchange rate is R13,4500 USD and the three-month forward exchange rate is R13.4000/USD. In South Africa, the money market interest rate is 8% per annum for a three-month investment. There are two alternative ways of paying for the Rig. Option 1. Keep the funds at bank in Zimbabwe and buy R750 000.00 forward. Option 2. Buy a certain rand amount spot today and invest the amount in South Africa for three months so that the maturity value becomes equal to R750 000 a) Calculate the forward premium/discount 13 marks b) Evaluate each payment method and justify which method is preferred [10 marks) c) Discuss any four (4) operating policies a tiro may put in place in order to reduce exposures in its international operations [12 marks] TOTAL: [25 marks QUESTION FOUR Malox Water (pvt) Itd purchased a Drilling Rig from South Africa for R750 000.00, payable in three months. They have enough US dollar cash in his US Nostro account in Zimbabwe, which pays 0.35% interest per month, compounded monthly, to pay for the Rig. Currently, the spot exchange rate is R13,4500 USD and the three-month forward exchange rate is R13.4000/USD. In South Africa, the money market interest rate is 8% per annum for a three-month investment. There are two alternative ways of paying for the Rig. Option 1. Keep the funds at bank in Zimbabwe and buy R750 000.00 forward. Option 2. Buy a certain rand amount spot today and invest the amount in South Africa for three months so that the maturity value becomes equal to R750 000 a) Calculate the forward premium/discount 13 marks b) Evaluate each payment method and justify which method is preferred [10 marks) c) Discuss any four (4) operating policies a tiro may put in place in order to reduce exposures in its international operations [12 marks] TOTAL: [25 marks