This is a calculation problem.

This is a calculation problem.

21/E-Bird Corporation manufactures and sells outdoor playground equipment throughout the world. It just sold a playground complex to a Mexican company. The sale was priced at Peso 10 million, with payment due in six months. E-Bird's cost of capital is 12% per annum. The current spot rate is Peso 20.20/$, and the 6-month forward rate is Peso21.50/$. The Mexico 6-month borrowing rate is 14%p.a. and the investing rate is 10%p.a. The US 6-month borrowing rate is 7% p.a. and the investing rate is 4% p.a. E-Bird currently does not have any positive NPV projects available but has $2 million short-term loan. (13 points) a. Show how E-Bird can hedge the foreign exchange exposure in the money market. b. Show how E-Bird can hedge the foreign exchange exposure in the forward market. Which hedging (forward market or money market) is more attractive to E-Bird? Please provide reasons to justify your answer. d. At what investing rate would E-Bird be indifferent between the money market hedge and the forward market hedge? c