Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Exchange rate forecast Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Majors AUD/USD 0.74 0.76 0.77 0.77 0.78 0.79 0.80 0.80 0.66 0.67 0.68 0.69

image text in transcribed
image text in transcribed
Exchange rate forecast Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Majors AUD/USD 0.74 0.76 0.77 0.77 0.78 0.79 0.80 0.80 0.66 0.67 0.68 0.69 0.70 0.70 0.72 0.72 NZD/USD USDJPY 103 103 100 100 100 99 98 98 EUR/USD 1.22 1.23 1.25 1.26 1.27 1.28 1.30 1.31 GBP/USD 1.36 1.40 1.40 1.43 1.44 1.45 1.47 1.48 USD/CHF 0.91 0.91 0.91 0.91 0.91 0.92 0.91 0.91 1.32 1.29 1.28 1.28 1.27 1.26 USD/CAD USD/CNY 1.25 1.25 6.70 6.60 6.55 6.50 6.45 6.40 6.35 6.30 Australian Cross Rates AUD/NZD 1.13 1.13 1.13 1.12 1.11 1.12 1.11 1.11 AUD/JPY 76 78 77 77 78 78 78 78 AUD/EUR 0.61 0.62 0.62 0.62 0.62 0.62 0.61 0.61 AUD/GBP 0.54 0.54 0.55 0.54 0.54 0.54 0.54 0.54 AUD/CHF 0.67 0.69 0.70 0.71 0.71 0.72 0.73 0.73 AUD/CAD 0.97 0.98 0.99 0.99 0.99 0.99 1.00 1.00 AUD/CNY 4.96 4.99 5.04 5.03 5.05 5.04 5.06 5.04 Question 2 (20 marks) You are a CFO of an Australian company with a liability of USD 1 million due in December 2021. You have receivables of 10 million Japanese yen due in December 2021. Assuming that the forecasts given in table 1 are accurate and using the forward rates for AUD/USD and AUD/JPY, does it make sense to hedge a) your payable in USD; b) your receivable in JPY? Illustrate with data obtained from internet sources / IRESS trading room. You may use forwards/futures/options on the relevant currency pairs (if available). (20 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management For Nonprofit Organizations Policies And Practices

Authors: Jo Ann Hankin, John Zietlow, Alan Seidner, Tim O'Brien

3rd Edition

1119382564, 9781119382560

More Books

Students also viewed these Finance questions