Delta Fund, a South African-based investment fund, which has USD 400 million invested in a USD Property Fund and EUR500M invested in Euro Fund. Sanlam Fund home currency is the South African rand (ZAR). On 1 July 2015, Delta decides to fully hedge the fund's currency risk for the next two months. Data are presented in Exhibit 1. Exhibit 1 Foreign Exchange Rates 1 July 2015 Spot rate (ZAR/USD) Spot rate (ZAR/EUR) September dollar futures contract (size = USD 100,000) (ZAR/USD) September Euro futures contract (size = EUR 100,000) (ZAR/EUR) 11.59 15.58 11.57 15.67 On 1 September 2015, Sanlam USD Fund has increased to USD 412.60 million; its Euro Fund has increased to EUR 515.75 million. Current foreign exchange data are presented in Exhibit Exhibit 2 Foreign Exchange Rates 1 September 2015 Spot rate (ZAR/USD) 11.09 Spot rate (ZAR/EUR) 14.48 September dollar futures contract (size = USD 100,000) (ZAR/USD) 10.72 September euro futures contract (size = EUR 100,000) (ZAR/EUR) 14.09 ii) Evaluate the effectiveness of the Sanlam Fund's hedge by comparing the fully hedged portfolio return with the unhedged portfolio return show your calculations for the hedge portfolio and unhedge portfolio retum separately. iii) Explain why the portfolio is not fully hedge from currency risk? iv) When is most suitable to use a forward contract instead of a futures contract