Question: OGS Co expects to receive 400,000 from export sales at the end of six months. A forward rate of 2685 per $1 has been offered

OGS Co expects to receive 400,000 from export sales at the end of six months. A forward rate of 2685 per $1 has been offered by the company's bank and the spot rate is 2663 per $1. OGS Co can borrow short term in the euro at 10% per year and the rate of interest on dollar is 5% per year.

Required: Calculate the dollar income from a forward market hedge and a money market hedge, and indicate which hedge would be financially preferred by OGS Co.

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