QUESTION QUESTION 3 or 4 Blue Cosmetics Ltd. (a London-based firm) has future receivables of 6,500,000 New Zealand dollars (NZ$) in one year. It must decide whether to use hedging techniques or not. The existing spot rate is 0.51/NZS and the one-year forward rate is 0.495/NZS. Blue Cosmetics created a probability distribution for the future spot rate in one year as follows: Future Probability Spot Rate E0.46/NZS 0.48/NZS 25% E0.50/NZS 0.52/NZS 25% 35% 15% The following one-year options on New Zealand dollars are available in the market Put Option Call Option 0.53/NZS 0.49/NZS Strike nie Put Option Call Option 0.53/NZ$ 0.49/NZ$ Strike price Premium 0.020/NZS 0.046/NZS Moreover, the following money market rates are available: in New Zealand in the UK 196 pa 4% p.a. Deposit rate Borrowing rate 2% pa 5% p.a. Required: 1. Given this information, determine a forward hedge, a money market hedge, a currency options hedge, and remaining unhedged positions for this transaction (18 points) 2. Decide whether Blue Cosmetics should hedge its receivables position. And how? (7 points)