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$2.09 million instead of the initial an agreed amount of CNY5.34 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$2.09 million.

What is the CNY costs for the forward hedging strategy based on the information in Table 1?

TABLE 1 For Chinese yuan (CNY) Spot rate A$0.4633/CNY One-year forward rate A$0.5350/CNY One-year CNY deposit and borrowing rate 8.66% One-year call options Exercise price = A$0.62 Premium = A$0.04 One-year put options Exercise price = A$0.58 Premium = A$0.05 For Australian dollar (A$) Spot rate CNY2.8009/A$ One-year forward rate CNY1.7463/A$ One-year A$ deposit and borrowing rate 4.91% One-year call options Exercise price = CNY2.36 Premium = CNYO. 16 One-year put options Exercise price = CNY2.06 Premium = CNYO.15