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Answer the following questions:

Chapter 11 Question 2

2.)Hedging on payable: Assume the following information ..

90 day U.S interest rates                                    4%
90 day Malaysian interest rate                         3%
90 day forward rate of Malaysian ringgit       $.400
Spot rate of Malaysian ringgit                         $.404

Assume that the Santa Barbara Co.in the united states will need 300,000 ringgit in 90 days. It wishes to hedge this payable position. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated costs for each type of hedge.


Chapter 17 question 11

11.) Costs of capital across Countries ;
Explain why the cost of capital for a U.S based MNC with a large subsidiary in Brazil is higher than for a U.S based MNC in the same industry with a large subsidiary in Japan.Assume that the subsidiary operations for each MNC are financed with a local debt in the host country.

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