Question
Sing Tao wants to import goods for 2.58 million Australian dollar (A$) and pay to Australian exporter, WA Co., in one year. Sing Tao also
Sing Tao wants to import goods for 2.58 million Australian dollar (A$) and pay to Australian exporter, WA Co., in one year. Sing Tao also wants to minimise its exchange rate risk for the payment of A$2.58 million by taking the money market hedging strategy.
Calculate the Chinese yuan (CNY) costs using the money market hedging strategy based on the information in Table 1. (Enter the whole number without sign and symbol).
| TABLE 1 | |
| For Chinese yuan (CNY) |
|
| Spot rate | A$0.4062/CNY |
| One-year forward rate | A$0.5567/CNY |
| One-year CNY deposit and borrowing rate | 7.44% |
| One-year call options | Exercise price = A$0.53 |
| Premium = A$0.04 | |
| One-year put options | Exercise price = A$0.57 |
| Premium = A$0.05 | |
|
|
|
| For Australian dollar (A$) |
|
| Spot rate | CNY3.1618/A$ |
| One-year forward rate | CNY1.5621/A$ |
| One-year A$ deposit and borrowing rate | 4.43% |
| One-year call options | Exercise price = CNY1.98 |
| Premium = CNY0.16 | |
| One-year put options | Exercise price = CNY1.84 |
| Premium = CNY0.1 | |
Answer:
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