question archive A China's company will receive5,000,000 USD in one year
A China's company will receive5,000,000 USD in one year
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A China's company will receive5,000,000 USD in one year. Assume that one-year Chinese interest rate is 4% and one-year American interest rate is 6%, spot rate of USD is 7.0 ¥ and one-year forward rate of USD is 6.8 ¥. Would it be better-off using a forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge.
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