4) (3 pts) If hedging is expected to be more costly than not hedging, why would a firm even consider hedging? 5) (6 pts) Forward versus Money Market Hedge on Payables. Assume the following information: 90 day U.S. interest rate =1.1% per 90 days or 4.4% per year compounded quarterly 90 day Malaysian interest rate =1.5% per 90 days or 6% per year compounded quarterly Assume borrowing and lending rates are the same for simplicity. 90 day forward rate of Malaysian ringgit =$0.39/1MYR Spot rate of Malaysian ringgit =$0.40/1MYR Assume that the Santa Barbara Co. in the United States will need 800,000 ringgit in 90 days. It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated costs for each type of hedge. 6) (6 pts) Forward versus Money Market Hedge on Receivables. Assume the following information: 180 day U.S. interest rate =2.4% per 180 days or 4.8% per year compounded semi-annually 180 day British interest rate =1.4% per 180 days or 2.8% per year compounded semi-annually 180 day forward rate of British pound =$1.34 Spot rate of British pound =$1.33 Assume that Riverside Corp. from the United States will receive 200,000 pounds in 180 days. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated revenue for each type of hedge