Question: company a an australian business has the payable of 100000...
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%.
As the financial advisor, which option would you like to recommend?