Reference no: EM132679316
1. Maria Lilita is a chief financial officer of Mrident Group based in Unites States. She has just concluded for the sale of telecommunication equipment to Regency, a British firm for £10,000,000 and payment due in 3 months later.
The following financial and market information are available to Maria:
Spot exchange rate : $1.7640/£
3- month forward rate: : $1.7540/£
Annual interest rate in UK : 8%
Annual interest rate in USD : 6%
3-month Call option on USD : £ 1.0711/$ with a premium of 2%
3- month Put option on USD : £1.0700/$ with a premium of 2%
Assume the cost of capital of the company is 10% and the company does not have surplus fund. Should Maria implements forward hedge, money market hedge, or currency options hedge? Justify your answer.
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