Forward hedge or money market hedge

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Reference no: EM131920895

Given the following information: 90 day U.S. interest rate = 6% 90 day Chinese interest rate = 5% 90 day forward rate of Chinese Yuan = $.400 Spot rate of Chinese Yuan = $.404 Biqing Co. in the United States will need 300,000 Chinese Yuan in 90 days, and the firm wants to hedge this payables position. Which way is better, a forward hedge or a money market hedge? Please justify your answer with estimated costs for each type of hedge.

Reference no: EM131920895

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