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Calculate the Chinese yuan (CNY) costs using the forward market hedging strategy

Calculate the Chinese yuan (CNY) costs using the forward market hedging strategy

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Sing Tao wants to import goods for 2.54 million Australian dollar (A$) and pay to Australian exporter, WA Co., in one year. Sing Tao also wants to minimise its exchange rate risk for the payment of A$2.54 million by taking the forward market hedging strategy.

Calculate the Chinese yuan (CNY) costs using the forward market hedging strategy based on the information in Table 1. (Enter the whole number without sign and symbol).  

 

 
For Chinese yuan (CNY) Spot rate One-year forward rate One-year CNY deposit and borrowing rate One-year call options One-year put options For Australian dollar (A$) Spot rate TABLE 1 One-year forward rate One-year A$ deposit and borrowing rate One-year call options One-year put options A$0.4396/CNY A$0.5796/CNY 8.69% Exercise price = A$0.59 Premium = A$0.04 Exercise price = A$0.53 Premium = A$0.06 CNY2.9029/A$ CNY1.9733/A$ 0 4.83% Exercise price = CNY1.67 Premium = CNYO.2 Exercise price = CNY2.35 Premium = CNYO.11
Transcribed Image Text:For Chinese yuan (CNY) Spot rate One-year forward rate One-year CNY deposit and borrowing rate One-year call options One-year put options For Australian dollar (A$) Spot rate TABLE 1 One-year forward rate One-year A$ deposit and borrowing rate One-year call options One-year put options A$0.4396/CNY A$0.5796/CNY 8.69% Exercise price = A$0.59 Premium = A$0.04 Exercise price = A$0.53 Premium = A$0.06 CNY2.9029/A$ CNY1.9733/A$ 0 4.83% Exercise price = CNY1.67 Premium = CNYO.2 Exercise price = CNY2.35 Premium = CNYO.11
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