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(1)(a)What is exchange rate risk? Distinguish between Transaction Exposure and Economic exposure to exchange rate...

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Accounting

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(1)(a)What is exchange rate risk? Distinguish between Transaction Exposure and Economic exposure to exchange rate movements. (b)Consider the following information: 90-day U.S interest rate......... .4% 90-day Malaysian interest rate.... .3% 90-day forward rate for the Malaysian Ringgit ..$0.400 Spot Rate of Malaysian Ringgit .... $0.404 Assume a U.S based MNC will need 300,000 Ringgit in 90 days and wishes to hedge this payable position. Would it be better off using a FORWARD hedge or MONEY MARKET hedge

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