| L+E 800 ESF MBC Bank 100.00 Deposits 100.00 Wholesale funding USD 100 800.00 Common Equity Australian Treasury Bonds Loans (a) Copy the above balance into your script and add the missing numbers given that the exchange rate today is AUD/USD 0.80 (1 AUD = 0.80 USD). (2 marks) (b) Calculate the simple leverage ratio of MBC bank. (2 marks) (c) Show what would happen to MBC bank if the AUD would depreciate to AUD/USD 0.70. (2 marks) The risk manager of MBC bank suggests to sell all Australian Treasury Bonds and to buy USD Treasury Bills to hedge the FX risk. Explain why buying USD assets would be a hedge for MBC Bank. (3 marks) The bank decides to follow the recommendation expressed in (d): The bank sells all Australian Treasury Bonds and uses the proceeds to buy USD Treasury Bills; assume the FX rate is still AUD/USD 0.80. Show the changes in the balance sheet and evaluate if the bank is now fully hedged against FX fluctuations. (4 marks) What type of derivative could the bank have used alternatively to protect itself from FX losses? Should the bank take a long or a short position in this derivative? (2 marks)