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You are given that the 180-day Australian interest rate is 1% and the 180-day Singapore interest rate is 2%. The 180-day forward rate of the
You are given that the 180-day Australian interest rate is 1% and the 180-day Singapore interest rate is 2%. The 180-day forward rate of the Singapore dollar is A$1.10 and the spot rate of the Singapore dollar is A$1.08. Assume that a company from Australia will receive S$100,000 in 180 days.
a. Calculate the estimated revenue for a forward hedge.
b. Calculate the estimated revenue for a money market hedge.
c. Would it be better to use a forward hedge or a money market hedge? Explain your answer.
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