Question: Compare the forward quotes, money market hedges and options with each other to determine the best exchange rate hedge for France (Complete Table 5 on

Considering the calculations you have done so far, you need to attend to a number of import transactions for goods that compa

Bank applies 360 day-count convention to all currencies. Explanation - e.g. 3 month borrowing rate on $ = 2.687%. This is the

Compare the forward quotes, money market hedges and options with each other to determine the best exchange rate hedge for France (Complete Table 5 on the separate answer sheet)

Table 5: France: Exchange rate hedges compared: (3 marks) Forward rate Money market hedge locked in exchange rate $/€ Option

Calculate the exchange rates that will apply if the money market hedges are used for the export to Canada (Complete Table 6 on the separate answer sheet)

Table 6: Canada export with money market hedge: (8 marks) PV of foreign currency to be borrowed Converted at $ amount with sp

Considering the calculations you have done so far, you need to attend to a number of import transactions for goods that companies in the United States expressed interest in. The first transaction is for the import of good quality wines from France, since a retail liquor trading chain customer in the United States, for who you have been doing imports over the past five years has a very large order this time. The producer in France informed you that the current cost of the wine that you want to import is and 2,500,000. The producer in France will only ship goods in three months' time due to seasonal differences but payment will have to be conducted six months from now. The second transaction is for the export of 3d printers manufactured in the U.S.A. The country where it will be exported to is Canada. The payment of CAD 2,500,000 for the export to Canada wll be received twelve months from now. You consider different transaction hedges, namely forwards, options and money market hedges. You are provided with the following quotes from your bank, which is an international bank with branches in all the countries: Forward rates: Currencies Spot 3 month (90 6 month (180 9 month (270 12 month (360 days) days) days) days) $/ 1.14134 1.14743 1.15354 1.15969 1.16587 $/CAD 0.76465 0.76559 0.77475 0.76748 0.76843 Bank applies 360 day-count convention to all currencies (for this assignment apply 360 days in all calculations). Annual borrowing and investment rates for your company: Country 3 month rates 6 months rates 9 month rates 12 month rates Borrow Invest Borrow Invest Borrow Invest Borrow Invest United States 2.687% 2.554% 2.713% 2.580% 2.740% 2.607% 2.766% 2.633% Europe 0.505% 0.480% 0.510% 0.485% 0.515% 0.490% 0.520% 0.495% Canada 2.177% 2.069% 2.198% 2.090% 2.220% 2.112% 2.241% 2.133%

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