(a) You are given the following for a forecasting attempt of the Singapore Dollar against the US Dollar.

(i) Percentage change in the exchange rate over one month is 8% (ii) Random error term calculated is 0.004 (iii) Intercept of the line is 0.06 (iv) Slope coefficient is 1.3 Calculate the percentage change in inflation-adjusted cash flows measured in the firms home currency over period of one month. Interpret the result obtained (in your own words) (2 marks)

(b)Name the various hedging techniques available for short term exposures. Explain any three in your own words how the technique helps to hedge the exchange rate risk. Illustrate through suitable example.

Q6. (a) You are given the following for a forecasting attempt of the Singapore Dollar against the US Dollar. (i) Percentage change in the exchange rate over one month is 8% (ii) Random error term calculated is 0.004 (iii) Intercept of the line is 0.06 (iv) Slope coefficient is 1.3 Calculate the percentage change in inflation-adjusted cash flows measured in the firm's home currency over period of one month. Interpret the result obtained (in your own words) (2 marks) (b)Name the various hedging techniques available for short term exposures. Explain any three in your own words how the technique helps to hedge the exchange rate risk. Illustrate through suitable example. (6 marks)