Section B (Attempt only TWO questions in Section B) Question B1 HB Corp., a UK company, has subsidiaries in the U.S., Germany, Singapore and Australia. It regularly sells goods denominated in U.S. dollars. The company will have two transactions in the near future: Three months (90 days): Paying 400,000 Euros for imported goods Six months (180 days): Receiving 600,000 USDs for exports The following exchange rates and interest rates are available for the company: Bid Quote Ask Quote Spot exchange rate (Euro per 1): 1.17 1.13 Three-month forward rate (Euro per 1): Spot exchange rate (USD per 1): 1.188 Six- month forward rate (USD per 1): 1.202 Spot exchange rate (AUD per 1): 1.762 1-year forward rate (AUD per 1): 1.765 1.738 1.10 1.05 1.217 1.178 1.735 1 year (360 days) interest rates: Deposit 4.0% Borrow 7.8% 6.7% 6.2% 7.8% USD Pound Euro AUD 2.4% 3.2% 5.2% a) Suggest how HB Corp. could implement a money market hedge for payables, support your answer with detailed calculations. Would HB Corp. be better off using forward hedge or money market hedge? Substantiate your answer with estimated cost each type of hedge. (10 marks)