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Document1 - Word Gert Design Layout References Mailings Review View Help Forward rates: Currencies Spot 3 month (90 6 month (180 month (270 12 month

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Document1 - Word Gert Design Layout References Mailings Review View Help Forward rates: Currencies Spot 3 month (90 6 month (180 month (270 12 month (360 days) days days days) $/CAD 0.76465 0.76559 0.77475 .7674 0.76843 5/AUD 0.72390 0.72516 0.72641 0.72766 0.72892 Bank applies 360 day-count convention to all currencies (for this assignment apply 360 days in all calculations). Annual borrowing and investment rates for your company Country month rates Borrow Invest 6 months rates Borrow Invest 2 month rates 12 month rates Borrow Invest Borrow Invest United State 2.6879% 2 5549% 2.7139 2.58025 1740% 260736 2.76676 2.63396 Canada 2.1779% 2 069% 2.198% 2.090% 2.220% 2.112% 2.24196 2.133%% Australia 1 973% 1875% 1.9929% 1.894% 2.012% 1914% 2.03195 1 933% Bank applies 360 day-count convention to all currencies. Explanation - e.g. 3 month borrowing rate on $ = 2.687%%. This is the annual borrowing rate for 3 months. If you only borrow for 3 months the interest rate is actually 2.68796/4 = 0.67175%% (always round to 5 decimals when you do calculations). Furthermore, note that these are the rates at which your company borrows and invests. The rates are not borrowing and investment rates from a bank perspective. .+ Table 4: Australia import cost with option hedge: (8 marks) Typ of Total cost of option in $ (Strike Option hedge breakeven exchange Show option |Total premium cost for import plus premium) rate Call answers option in this row: 17315.54 1821190.54 0.00688x2.5x(1+0.02687/4)x10*6 0.72847 0.72155x2.5x10*6+17315.54 1821190.54/2500000 working $ premium x total AUD value of import x (1+i) Total cost of option in Strike price x total AUD value of 5/ Total AUD value o import) + total premium transaction f. Assume you entered into the forward hedge for the import from Australia. Four months have passed since you entered into the hedge. Interest rates are the same as before. The spot exchange rate of the S/AUD is 0.72551. Calculate the value of your forward position. Please use a 360 day-count convention, since the bank also used a 360 day-count convention with the forward quotes provided to you. Also remember for interes rates use risk free rates provided under scenario 1. Show your calculation in table 8 on the separate answer sheet. Table 8: Value of the forward position (5 marks) Show answer in this row: IS loss or gain for long/short position in forward) Show your workings in the columns below the answers

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