An Australian exporter WA Co. will receive 5.35 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$0.5334/CNY

One-year forward rate A$0.5614/CNY

One-year CNY deposit and borrowing rate 7.38%

One-year call options

Exercise price = A$0.59

Premium = A$0.03

One-year put options

Exercise price = A$0.56

Premium = A$0.05

For Australian dollar (A$)

Spot rate CNY2.7412/A$

One-year forward rate CNY1.5317/A$

One-year A$ deposit and borrowing rate 4.40%

One-year call options

Exercise price = CNY2.28

Premium = CNY0.18

One-year put options

Exercise price = CNY2.08

Premium = CNY0.13

1) Calculate the A$ proceeds from the forward hedging strategy based on the information in Table 1.

(enter the whole number without sign and symbol).

Answer: ?

2) Calculate the A$ proceeds for the money market hedging strategy using the market information in Table 1.

(enter the whole number without sign and symbol)

Answer: ?

3) Calculate the minimum A$ proceeds for the options hedging strategy based on the market information in Table 1.

(enter the whole number without sign and symbol)

Answer: ?

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$ proceeds and wants to receive A$ rather than CNY in one year. Therefore, WA Co. proposed Sing Tao to pay WA Co. A$2.59 million instead of the initial an agreed amount of CNY5.35 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$2.59 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)

Answer: ?

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)

Answer: ?

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

Answer: ?