International Finance Management:

An Australian exporter WA Co. will receive 5.07 million Chinese yuan (CNY) from a Chinese importer Sing Tao in one year. WA Co. analyses the different hedging strategies (forward, money market and options) using the market information in the following Table 1 to minimise its exchange rate risk for the Australian dollar (A$) cash flow. TABLE 1 For Chinese yuan (CNY) Spot rate A$0.3998/CNY Calculate the A$ proceeds from the forward hedging strategy based on the information in Table 1. One-year forward rate A$0.5278/CNY (enter the whole number without sign and symbol). One-year CNY deposit and borrowing rate 8.94% One-year call options Exercise price = A$0.52 Premium = A$0.03 One-year put options Exercise price = A$0.58 Answer: Premium = A$0.06 For Australian dollar (A$) Spot rate CNY3.4138/A$ One-year forward rate CNY2.0009/A$ One-year A$ deposit and borrowing rate 4.20% One-year call options Exercise price = CNY1.71 Premium = CNY0.16 One-year put options Exercise price = CNY2.07 Premium = CNY0.13Calculate the A$ proceeds for the money market hedging strategy using the market information in Table 1. (enter the whole number without sign and symbol) Answer: Calculate the minimum A$ proceeds for the options hedging strategy based on the market information in Table 1. (enter the whole number without sign and symbol) Answer:After analysing the different hedging strategies, WA Co. found that none of these hedging strategies (forward, money market and options) provides the expected A$ proceeds and wants to receive A$ rather than CNY in one year. Therefore, WA Co. proposed Sing Tao to pay WA Co. A$2.73 million instead of the initial an agreed amount of CNY5.07 million. As an importer before signing a new agreement, Sing Tao analyses the different hedging strategies using the market information in Table 1 to minimise its exchange rate risk for the payment of A$2.73 million. What is the CNY costs for the forward hedging strategy based on the information in Table 1? (enter the whole number without sign and symbol) Answer:What is the CNY costs for the money market hedging strategy based on the information in Table 1? (enter the whole number without sign or symbol) Answer: Calculate the maximum CNY costs for the options hedging strategy using the information in Table 1