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Suppose the current spot rate is 0.117/TL and the 5-year forward rate is 0.082/TL. The interest rates in the Eurocurrency market for TL and are

Suppose the current spot rate is 0.117/TL and the 5-year forward rate is 0.082/TL. The interest rates in the Eurocurrency market for TL and are 8% and 3% per annum respectively. A Turkish company will be paid 600000 in 5 years. The company wants to hedge its transaction exposure.

Form a forward market hedge to protect the company against FX risk.

Form a money market hedge to protect the company in the question against FX risk. Which hedge strategy should the company use? Forward or Money market?

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