1.An Australian exporter WA Co. will receive5.83 million Chinese yuan(CNY) from a Chinese importer Sing Tao in one year. WA Co. analyses the different hedging strategies (forward, money market and options) using the market information in the following Table 1 to minimise its exchange rate risk for the Australian dollar (A$) cash flow.

TABLE 1

For Chinese yuan (CNY)

Spot rate

A$0.3695/CNY

One-year forward rate

A$0.5867/CNY

One-year CNY deposit and borrowing rate

8.14%

One-year call options

Exercise price = A$0.60

Premium = A$0.03

One-year put options

Exercise price = A$0.60

Premium = A$0.05

For Australian dollar (A$)

Spot rate

CNY3.1223/A$

One-year forward rate

CNY1.9017/A$

One-year A$ deposit and borrowingrate

4.01%

One-year call options

Exercise price = CNY2.36

Premium = CNY0.17

One-year put options

Exercise price = CNY2.04

Premium = CNY0.10

Calculate the A$ proceeds fromthe forward hedging strategybased on the information in Table 1.

(enter the whole number without sign and symbol).

2.Calculate the A$ proceeds for themoney market hedging strategyusing the market information in Table 1.

(enter the whole number without sign and symbol)

3.Calculate the minimum A$ proceeds for theoptions hedging strategybased on the market information in Table 1.

(enter the whole number without sign and symbol)

4.After analysing the different hedging strategies,WA Co. found that none of these hedging strategies (forward, money market and options) provides the expected A$ proceedsand wants to receive A$ rather than CNY in one year.Therefore, WA Co. proposed Sing Tao to pay WA Co. A$2.62 million instead of the initial an agreed amount of CNY5.83 million.As an importer before signing a new agreement, Sing Tao analyses the different hedging strategies using the market information in Table 1 to minimise its exchange rate risk for the payment of A$2.62 million.

What is the CNY costs for the forward hedging strategy based on the

information in Table 1?

(enter the whole number without sign and symbol)

5.What is the CNY costs for the money market hedging strategy based on the information in Table 1?

(enter the whole number without sign or symbol)

6.Calculate the maximum CNY costs for the options hedging strategy using the information in Table 1.