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Money Market (Recievable and Payable) Please explain while answering in the simplest steps Q1) Assume...

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Finance

Money Market (Recievable and Payable) Please explain while answering in the simplest steps

Q1) Assume the following information: 90-day Thailand interest rate = 5% 90-day Malaysian interest rate = 4% 90-day forward rate of Malaysian ringgit = TH8.922 Spot rate of Malaysian ringgit = TB 8.870 Your company in Bangkok will need to pay RM500,000 in 90 days. You are considering to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Show your workings.

Q2) Assume the following information: USD interest rate p.a. = 5.5% Malaysian interest rate p.a. = 4.5% One year forward rate of Malaysian ringgit = USD0.2550 Spot rate of Malaysian ringgit = USD0.2555

Your company will receive USD300,000 in 90 days. You are considering to hedge this receivable position. Would it be better off using a forward hedge or a money market hedge? Show your workings

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