Business, 16.04.2020 04:03 odriskel49

Bradley Machine Corp. expects to need S$500,000 (Singapore dollars) for an accounts payable in one year. The current spot rate of the Singapore dollar is $0.60/S$. The one year forward rate of the Singapore dollar is $0.62/S$. The spot rate in one year is forecasted to be $0.61/S$. The firm’s WACC is 12% per year. Assume that one year put options on Singapore dollars are available, with an exercise price of $0.63/S$ and a premium of $0.04/S$. One year call options on Singapore dollars are available with an exercise price of $0.60/S$ and a premium of $0.03/S$. Assume the following money market rates: U. S. Singapore Deposit rate: 8% 5% Borrowing rate 9% 6% Assume that for money market hedges, the firm invests or borrows at the short-term deposit rates given above rather than at their WACC. Given this information, what will be the total cost in USD to Bradley of the S$500,000 one year from now if the Forward contract hedge is used?A.$310,000
B.$311,428
C.$305,000
D.$316,800

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Bradley Machine Corp. expects to need S$500,000 (Singapore dollars) for an accounts payable in one y...

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