Problem: Assume the following information:
90 day U.S. interest rate = 2%
90 day Malaysian interest rate = 4%
90 day forward rate of Malaysian ringgit = $.50
Spot rate of Malaysian ringgit = $.45
Assume that the Santa Barbara Co. in the United States will need 700,000 ringgit in 90 days.
It wishes to hedge this payables position. If the firm uses the forward hedge, it will pay out in 90 days
O A. 315000
O B. 327600
O C. 321300
O D. 350000
O E. 359000