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(5)Assume the following information: 90-day U.S. interest rate 90-day Malaysian interest rate 90-day forward rate of the Ringgit 4% 3% $0.400

(5)Assume the following information: 90-day U.S. interest rate 90-day Malaysian interest rate 90-day forward rate of the Ringgit 4% 3% $0.400

International Financial Management
International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 53QA
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(5)Assume the following information: 90-day U.S. interest rate 90-day Malaysian interest rate 90-day forward rate of the Ringgit Spot rate for the Ringgit 4% 3% $0.400 $0.404 Assume ABC based in NYC needs 600,000 ringgits in 90 days to pay for its imports and wishes to hedge its payable position. Would it be beneficial to engage in forward hedge or a money market hedge? Hint: Find the cost for each type of Hedge and compare the results.
Transcribed Image Text:(5)Assume the following information: 90-day U.S. interest rate 90-day Malaysian interest rate 90-day forward rate of the Ringgit Spot rate for the Ringgit 4% 3% $0.400 $0.404 Assume ABC based in NYC needs 600,000 ringgits in 90 days to pay for its imports and wishes to hedge its payable position. Would it be beneficial to engage in forward hedge or a money market hedge? Hint: Find the cost for each type of Hedge and compare the results.
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