QUESTION FOUR (9 marks) You are financial analyst for a large local company with suppliers in Australia and buyers in Caricom. The Company has \$A5 million in payables to an Australian supplier due on June 30 and \$US4 million due from Caricom sales on June 15 . There are no $A receivables. The spot rate of the $A is $US0.70 and the price on a June futures contract is $USO.72. The company can borrow and lend in any currency. The short term $US interest rate is 2% and the $A interest rate is 5%. Ignore credit risk. A Identify the currency risk facing the company and create a money market hedge for the $A. (6 marks) B Assume that the \$A depreciated two days after the hedge in (A) above so that it is worth \$US 0.68. How will this affect the firm's cash flows