A company in Ghana is expecting to pay $300,000 in 3 months time. It is afraid that within this period the cedi will depreciate against the dollar. Given that the currency exchange rate is GHS 4.4 and that the current dollar deposit rate is 8.5% per annum.
Required;
i. Clearly indicate with examples the specific risk the company is exposed to
ii. Explain clearly how the company can use the money markets to hedge the risk identified in (i)