Intel, a US semiconductor manufacturer, has sold SGD 70 million worth of computer chips to a Singapore company. The payment (in SGD) is due in six (6) months.
Intel is given the following information:
Spot rate = SGD 1.32 / USD
9-month forward rate = SGD 1.35 / USD
Interest rate in Singapore = 2% per year
Interest rate in U.S.A. = 3% per year
Intel’s own forecast suggests that the spot rate 6 months from now is most likely SGD 1.34 / USD.
If the firm uses the forward hedge, how much USD will it need in 6 months?
A. USD 51,852,000
B. USD 52,240,000
C. USD 53,030,000
D. USD 58,152,000