An Australian importing company will require 5m USD in 6 months time to meet expenses....
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An Australian importing company will require 5m USD in 6 months time to meet expenses. The current spot rate is: AUD / USD 0.6583 / 0.6590. Australian interest rates are currently at 3.5% p.a. and US interest rates are at 1% p.a. Design a money market hedge which will remove the FX risk faced by the company, yet not altering the timing of the payment. Show clearly the AUD cash flow in the future. Please show all workings.
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