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Question: company a an australian business has the payable of 100000...

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Company A, an Australian business, has the payable of 100,000 USD, which will expire in the next 6 months. The current spot rate (AUD/USD) is 1.29. It is afraid of the foreign exchange risk exposure and considers about two options:

 - Entering a forwards contract at 1.3 AUD/USD, which has the maturity of six months.

 - Entering a money market hedge, with interest rate information as follows:

   +rAUD: 3% - 5%.

   +rUSD: 6%-7%.

As the financial advisor, which option would you like to recommend?

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