if you know that XYZ, Inc., is an MNC based in Chicago that will need 1,000,000 Singapore
if you know that XYZ, Inc., is an MNC based in Chicago that will need 1,000,000 Singapore dollars in 90 days to purchase Singapore imports. And this company has three scenarios to buy this amount of fund as follows:
a. It can buy Singapore dollars for immediate delivery at the spot rate of $.50 per Singapore dollar (S$).
b. It could wait 90 days and then exchange U.S. dollars for Singapore dollars at the spot rate existing at that time.
c. XYZ negotiated a 90-day forward rate of $.50 to purchase S$1,000,000. While the spot rate in 90 days is $.47.
Evaluate the cost of buying currency in each scenario with clarifying which scenario will be better for the company.