It wishes to hedge this payables position would it be


With the following information:

• 90 day U.S. interest rate = 1.5%

• 90-day Philippine interest rate = 3%

• 90-day forward rate of Philippine peso = $0.020

• Spot rate of Philippine peso = $0.025

Assume your firm in the United States will need 300,000,000 Philippine pesos in 90 days. It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Provide the mathematical analysis to justify your position.

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Financial Management: It wishes to hedge this payables position would it be
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