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To receive credits, you have to show the detailed procedure that take you to the partial results and to the conclusion.
Apple, Inc. expects to receive S$1,500,000 in 1 year. The existing spot rate of the Singapore dollar is $0.64. The 1 year forward rate of the Singapore dollar is $0.66. Apple created a probability distribution for the future spot rate in 1 year as follows:
| Future Spot Rate | Probability |
| $0.65 | 30% |
| $0.67 | 40 |
| $0.71 | 30 |
Assume that 1-year put options on Singapore dollars are available, with an exercise price of $0.67 and a premium of $0.03 per unit. Assume the following money market rates:
|
| U.S. | Singapore |
| Deposit rate | 9% | 6% |
| Borrowing rate | 10 | 7 |
Given this information, determine whether a forward hedge, a money market hedge, or a currency options hedge would be most appropriate. Then compare the most appropriate hedge to an unhedged strategy, and decide whether Apple should hedge its receivables position.
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