Question: Question 1 SUSS Global Solutions Ltd. is a Singapore-based multinational consulting firm renowned for its expertise in providing cutting-edge technology solutions and comprehensive advisory services.

Question 1

SUSS Global Solutions Ltd. is a Singapore-based multinational consulting firm renowned for its expertise in providing cutting-edge technology solutions and comprehensive advisory services.

With a broad clientele spanning across diverse sectors, including government agencies and private enterprises, the company has earned an excellent reputation for its innovative approaches and tailored strategies. Currently, it anticipates a substantial order from the government of Germany. Upon fulfillment of this order, it will receive 5 million euros. Given that the company's operational expenses are denominated in Singapore dollars, SUSS Global Solutions Ltd. is keen to mitigate any potential currency risks associated with the euro.

To address this, the company has proactively reached out to a reputable bank with expertise in foreign exchange derivatives. By leveraging these financial instruments, SUSS Global Solutions Ltd. aims to effectively hedge its exposure to currency fluctuations, ensuring financial stability and safeguarding its profitability amidst dynamic market conditions.

Question 1a

Appraise how SUSS Global Solutions Ltd. could use currency futures to hedge its position.

(10 marks)

Question 1b

Appraise how SUSS Global Solutions Ltd. could use currency options to hedge its position.

(10 marks)

Question 1c

Discuss one (1) advantage and one (1) disadvantage to SUSS Global Solutions Ltd. of using currency options instead of currency futures to hedge its position.

(10 marks)

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