VietThang is a Vietnamese textile & garment company based in Saigon. In September VietThang delivers a large shipment of garments to a major distributor in Canada. The receivable, C$20 million, is due in 90 days. Vietthang's treasury team has collected the following currency and market quotes. The company's foreign exchange advisors believe the euro will be at about A$1.1700/$C in 90 days. VietThang's management does not use currency options in currency risk management activities.

Advise VietThang on which hedging alternative in term of the values and risk assessment of the settlements is probably preferable.

Assumptions 90-day A/R (CS) Current spot rate (USSCS) 90-day forward quote (USS/CS) Macquarie Bank 90-day forward quote (USS/CS) Expected spot rate in 90 days (USS/CS) 090-day United States interest rate 90-day Canadian interest rate Implied 90-day forward rate (calculated US$/CS) 90-day United States dolar borrowing rate 90-day Canadian dollar borrowing rate Viet Thang's cost of capital Values CAD 20,000,000.00 USD 0.7940 USD 0.7980 USD 0.8030 USD 0.8120 4.000% 4.400% USD 0.7932 5.000% 5.500% 9.600%