BF2 207 Question 3 Temasek Holdings is an investment company headquartered in Singapore with world - wide operations . It plans to sell its European equities portfolio , denominated in euros ( EUR ). and purchase an equivalent amount of U. S. equities , denominated in U.S. dollars ( USD ). Reckellly Temasek will realize net proceeds of 1 , 000, 000, 000 EUR at the end of 90 days and wants to eliminate the risk that the USD will appreciate relative to the EUR during this 90 - day period . The following exhibit shows exchange rates and interest rates of EUR , USD , and Singapore* dollar ( SGD ) : Exchange Rate Bid Ask Spot rate for EUR 1. 5353 SGD 1.5357 SGD Spot rate for USD 1.3560 SGD 1. 3567 SGD 90 - day forward rate for EUR 1. 5396 SGD 1. 5404 SGD 90 - day forward rate for USD 1. 3537 SGD 1. 3546 SGD Interest Rate Bid ASK 90- day interest rate for EUR 0. 25% 0 . 50 % 9 90 - day interest rate for USD 2 . 10% 2 . 20% 90 - day interest rate for SGD 1.30% 1.50 % ( 2 ) Describe the currency transaction ( S ) that Temasek should undertake to eliminate currency risk over the 90 - day period . ( 6 marks ) ( b ) What is the cross exchange rate for EUR in terms of USD that Temasek would use to determine the current value its European equity portfolio ? ( 8 marks ) ( C ) Suppose that Temasek hedges its currency risk , 90 days later , what is the value of Temasek's European equity portfolio in USD ? ( 8 marks ) ( d ) What is the annualized forward premium or discount at which the FUR is trading versus the USD ? ( 4 marks ) ( TOTAL : 26 marks )