@ Homework: Chapter 10 Spring 2022 Homework Question 5, Problem 10-12 (algorithmic) Part 1 of 6 HW Score: 0%, 0 of 15 points O Points: 0 of 3 Save Farah Jeans. Farah Jeans of San Antonio, Texas, is completing a new assembly plant near Guatemala City. A final construction payment of 08,000,000 is due in six months. ("Q" is the symbol for Guatemalan quetzals.) Farah uses 19.50% per annum as its weighted average cost of capital. Today's foreign exchange and interest rate quotations are as follows: Farah's treasury manager, concerned about the Guatemalan economy, wonders if Farah should be hedging its foreign exchange risk. The manager's own forecast is as follows: a. How much in US dollars will Farah Jeans pay in 6 months without a hedge if the expected spot rate in 6 months is 08.40/5707.42/$? 06.60/5? b. How much in U.S. dollars will Farah Jeans pay in 6 months with a forward market hedge? c. How much in U.S. dollars will Farah Jeans pay in 6 months with a money market hedge ? d. Which method would you select and why? Data table Construction payment due in 6 months (A/P, quetzals) 8,000,000 Present spot rate (quetzals/$) 7.09 6-month forward rate (quetzals/$) 7.21 Guatemalan 6-month interest rate (per annum) 15.00% U.S. dollar 6-month interest rate (per annum) 6.50% Farah's weighted average cost of capital (WACC) 19.50% Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet. Print Done - X Data table n Expected spot rate in 6-months (quetzals/$): Highest expected rate (reflecting a significant devaluation) 8.40 Expected rate 7.42 Lowest expected rate (reflecting a strengthening of the quetzal) 6.60 Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet Print Done