RKT Group Plc is a British multinational consumer goods company headquartered in England. It manufactures and markets branded products in the health, hygiene, and home sectors. It sells a comprehensive range of products through over 60 operating companies into nearly 200 countries. The company's brands include air fresheners, household cleaners, laundry products, furniture polishes and dishwashing detergents. It also makes over-the-counter pharmaceuticals such as analgesics, antiseptics, flu remedies, and gastrointestinal medications and offers products for hair removal, denture cleaning and pest control. The company's business is structured through a matrix of three geographical segments: Europe and North America; Latin America, North Asia, Southeast Asia and Australia and New Zealand; and Russia, Middle East, North Africa, Turkey, and Africa. These segments consist of a centralized category development, global sales, supply, and support functions such as finance, human resources, and information services. The group also has two non-core businesses: ABC Pharmaceuticals and Food. The central category development function is responsible for strategies, brand equity programs and best practices, and new product development, namely research and development and consumer and market research, for implementation by the geographical segments. The supply function is responsible for all procurement, production, and logistics globally, and is directly responsible for the operation of the company's production facilities worldwide. Information services function is responsible for the company's global systems infrastructure and global systems, including enterprise resource planning systems. In one of the multinational deals, RKT has a deal of credit sales to a customer in Australia amounting to AUD750,000, payable in 3-month time (December 2021). The treasurer of RKT suggests a few foreign exchange rate risks hedging methods. (1) Borrow AUD for three months, convert the loan into sterling and repay the loan out of eventual receipts. (2) Enter into a 3- month forward exchange contract with the company's bank. (3) Enter into an appropriate futures contract, and (4) Enter into an appropriate options contract. Annual 3 months' interest rates UK 6% Australia 3% Europe 2.5% Assume the company borrow and lend at the same rate. The mid- market foreign exchange rates are as follow: Spot December March AUD to 1 2.3834 2.3688 2.4000 The AUD to 1 Currency futures (Sterling 62,500 contracts) December March futures futures 2.3500 2.4000 2.3900 2.5000 Now In December In March 2.5555 2.6000 Foreign currency option (Sterling 31,250 contracts, in AUD per ) Call Put December December March March Strike Price (AUD to 1) 2.40 0.07 0.08 0.06 0.04 Besides, the current Euro to 1 exchange rate is 1.667. RKT'S finance director, Mr. Mayer, has some forecasts of Euro exchange rates in two years-time from three prominent banks. Euro/ two-year forecasts Cadbank 1.452 ) Dodgebank 1.514 Kogibank 1.782 A non-executive director of RKT, Mrs. Douglas, has suggested that to forecast future exchange rates, the interest rate differential between countries should be used. She expresses that based on the current short-term interest rates in the UK and in the Europe (the annual 3 months' interest rates given in the table above), the exchange rate in two years' time will be Euro 1.747/. Required (in no more than 1,200 words) (a) Advise RKT Plc which of the method is the most financially advantageous for the AUD750,000 trade. Include relevant calculations in your advice. Forward Futures Options Money market (20 marks) (b) Analyse and review the four (4) factors RTK Plc need to consider before deciding whether to hedge the risk using the foreign currency markets. (20 marks) (c) RKT has a subsidiary in a country with no currency markets or developed capital and it also has some foreign currency deals with the developing countries. RKT plc is now about to invoice a customer in that developing country in the local currency. Advise RKT ple's treasurer five (5) approaches in which the risk can be managed in these considerations. (20 marks)