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II. Alice Jordan, an international pension fund manager, plans to sell equities [their current market value: 900 million denominated in Swiss Francs (CHF)] and to
II. Alice Jordan, an international pension fund manager, plans to sell equities [their current market value: 900 million denominated in Swiss Francs (CHF)] and to purchase an equivalent amount of equities denominated in South African Rands (ZAR). Alice will realize additional 5 million CHF to the current portfolio in Switzerland at the end of 30 days and wants to eliminate the risk that the ZAR will appreciate relative to the CHF during this 30-day period. Maturity Spot ZAR/USD Bid Ask 5.7681 5.7789 USD/CHF Bid Ask 0.5452 0.5470 30-day 5.7538 5.7641 0.5469 0.5487 1. (10 points) Describe the currency transaction that Omni should undertake to eliminate currency risk over the 30-day period. 2. (10 points) Compute the current values of Omni's Swiss equity portfolio in ZAR (Hint: Need to know the cross bid rate between ZAR and CHF (i.e., ZAR/CHF)
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