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$2.54 million by taking the money market hedging strategy.Calculate the Chinese yuan (CNY) costs using the money market hedging strategy based on the information in Table 1. (Enter the whole number without sign and symbol). ff1 For Chinese yuan (CNY)Spot rateOne-year forward rateOne-year CNY deposit and borrowing rateOne-year call optionsOne-year put optionsTABLE 1For Australian dollar (A$)Spot rateOne-year forward rateOne-year A$ deposit and borrowing rateOne-year call optionsOne-year put optionsA$0.4396/CNYA$0.5796/CNY8.69%Exercise price = A$0.59Premium = A$0.04Exercise price = A$0.53Premium = A$0.06CNY2.9029/A$CNY1.9733/A$4.83%Exercise price = CNY1.67Premium = CNYO.2Exercise price = CNY2.35Premium - CNY0.11=

Answered: Sing Tao wants to import goods for 2.54…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

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 money market hedging strategy.

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

ff1

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
TABLE 1
For Australian dollar (A$)
Spot rate
One-year forward rate
One-year A$ 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$
4.83%
Exercise price = CNY1.67
Premium = CNYO.2
Exercise price = CNY2.35
Premium - CNY0.11
=

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

Expert Solution

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions