Mini 3 1e50 X Wee X Ca X 5 Micr X 5 Micr x Micr X Ba223d46f14901d14de26c1bbf6108b8c24c4?response-content-disposition=inline%3Bfilename Question 2: Hedging Techniques (Compulsory Question) A. Based on the following information, calculate the associated amount uning forward, money market and option hedging strategies and select the appropriate stratex (7. Marks) TPlink Ine. is a Singaporean company. It needs $1 million in one year to settle an account payable. The existing spot rate of the Singapore dollar is $0.50. The one-year forward rate of the Singapore dollar currently exhibits a 4% forward discount. TPlink created a probability distribution for the future spot rate in one year as follows: Future Spot Rate Probability $0.57 30% 50% $0.51 90% Assume that one year call options on Singapore dollars are available, with an exercise price of $0.53 and a premium of $0.04 per unit. One-year put options on Singapore dollars are available with an exercise price of $0.50 and a premium of $0.03 per unit. The following money market rates are available: US Singapore Borrowing rate 9N 6% lovestment rute 8% 5 $0.53 B. Do you think, TPlink will be better off without any hedging? Yes or no? Show calculations for unbedged scenario and offer opinion about your standing (2.5 Marks) PART . Theoretical Concepts Answer any two of the following x-mark) () should an MNC rok over hedging should hedging very based on country risk 0) Define Interstate Party Raplain its relationship with covered interest arbitrage with a numerical example (C) What is Not Transion shows mumerical example, (d) plain "True Cost of Help Provide a numerical example (o) Baplain how the financing decision can influence the nativity of the present Value to exchange rate forecasts co What factors would be considered when deciding whether a buidary should reinvest earnings or remit them to the parent? ** MCQ part in moodle. No need to show any working for MCQ in your worksheet Mn X 1e5c x Wee X 9 Cam X * Micr x Mict 46f14901d14de26c1bbf6108b8c24c4?response-content-disposition=ir Question 2: Hedging Techniques (Compulsory Question) A. Based on the following information, calculate the associated amount using forward, money market and option hedging strategies and select the appropriate strategy. (7.5 Marks) TPLink Inc. is a Singaporean company. It needs $1 million in one year to settle an account payable. The existing spot rate of the Singapore dollar is $0.50. The one-year forward rate of the Singapore dollar currently exhibits a 4% forward discount. TPlink created a probability distribution for the future spot rate in one year as follows: Future Spot Rate Probability $0.57 30% $0.53 $0.51 Assume that one-year call options on Singapore dollars are available, with an exercise price of $0.53 and a premium of $0.04 per unit. One-year put options on Singapore dollars are available with an exercise price of $0.50 and a premium of $0.03 per unit. The following money market rates are avIilable: U.S. Singapore Borrowing rate 9% 6% Investment rate 8% 50% 20% 5% B. Do you think, TPlink will be better off without any hedging? Yes or no? Show calculations for unhedged scenario and offer opinion about your standing. (2.5 Marks) PART B: Theoretical Concepts Mini 3 1e50 X Wee X Ca X 5 Micr X 5 Micr x Micr X Ba223d46f14901d14de26c1bbf6108b8c24c4?response-content-disposition=inline%3Bfilename Question 2: Hedging Techniques (Compulsory Question) A. Based on the following information, calculate the associated amount uning forward, money market and option hedging strategies and select the appropriate stratex (7. Marks) TPlink Ine. is a Singaporean company. It needs $1 million in one year to settle an account payable. The existing spot rate of the Singapore dollar is $0.50. The one-year forward rate of the Singapore dollar currently exhibits a 4% forward discount. TPlink created a probability distribution for the future spot rate in one year as follows: Future Spot Rate Probability $0.57 30% 50% $0.51 90% Assume that one year call options on Singapore dollars are available, with an exercise price of $0.53 and a premium of $0.04 per unit. One-year put options on Singapore dollars are available with an exercise price of $0.50 and a premium of $0.03 per unit. The following money market rates are available: US Singapore Borrowing rate 9N 6% lovestment rute 8% 5 $0.53 B. Do you think, TPlink will be better off without any hedging? Yes or no? Show calculations for unbedged scenario and offer opinion about your standing (2.5 Marks) PART . Theoretical Concepts Answer any two of the following x-mark) () should an MNC rok over hedging should hedging very based on country risk 0) Define Interstate Party Raplain its relationship with covered interest arbitrage with a numerical example (C) What is Not Transion shows mumerical example, (d) plain "True Cost of Help Provide a numerical example (o) Baplain how the financing decision can influence the nativity of the present Value to exchange rate forecasts co What factors would be considered when deciding whether a buidary should reinvest earnings or remit them to the parent? ** MCQ part in moodle. No need to show any working for MCQ in your worksheet Mn X 1e5c x Wee X 9 Cam X * Micr x Mict 46f14901d14de26c1bbf6108b8c24c4?response-content-disposition=ir Question 2: Hedging Techniques (Compulsory Question) A. Based on the following information, calculate the associated amount using forward, money market and option hedging strategies and select the appropriate strategy. (7.5 Marks) TPLink Inc. is a Singaporean company. It needs $1 million in one year to settle an account payable. The existing spot rate of the Singapore dollar is $0.50. The one-year forward rate of the Singapore dollar currently exhibits a 4% forward discount. TPlink created a probability distribution for the future spot rate in one year as follows: Future Spot Rate Probability $0.57 30% $0.53 $0.51 Assume that one-year call options on Singapore dollars are available, with an exercise price of $0.53 and a premium of $0.04 per unit. One-year put options on Singapore dollars are available with an exercise price of $0.50 and a premium of $0.03 per unit. The following money market rates are avIilable: U.S. Singapore Borrowing rate 9% 6% Investment rate 8% 50% 20% 5% B. Do you think, TPlink will be better off without any hedging? Yes or no? Show calculations for unhedged scenario and offer opinion about your standing. (2.5 Marks) PART B: Theoretical Concepts
