Solution 1Purchase an AUD PutlEUR Call Option Expiry Date: 20150114 (four months] 'v'alue Date: 2D15Ul15 Strike 1: 0.59112) [at-themoney fwd} Strike 2: 0.6350 (50 pips outofthe-money (OTMD Premium 1 2.13% of AUD face value {~145 AUDIEUR pips} Premium 2: 1.81% of AUD face value {~124 AUDIELJR pips) This solution gives you the right but not the obligation to buy EUR and sell AUD at the strike rate on the expiry date. On the expiry date, if the prevailing spot AUDIEUR is below the strike rate, then you will exercise the right to deal at the higher strike rate. Conversely, it the prevailing spot AUDIEUR rate is higher than the strike rate, then you will let the option lapse and buy EUR against the HUD in the spot market at the higher rate. l have provided you with two prices so you can see the relationship between premium and strike prices. Solution zAUDIEUR Collar lL'IllptionBuy an AUD PuttEUFt Call and Sell an AUD CalllEUR PutZero Premium Expiry Date: 2015-01-14 (four months] 'v'alue Date: 2015-01-15 B Put Strike: 0.6859 (543 pips below the FEC} S Call Strike: 0.6942 B Put Strike: 0.6819 (1m pips below the FEC} S Call Strike: 0.6983 This solution locks you into a range whereby you have a worstcase rate {bought put strike] and the capacity to participate in favourable AUDIEUR movements up to the sold call strike. Ideally, the worst-case rate would be your budget rate. l have provided you with indicative pricing on two collar structures so that you can compare two different ranges. Remember, a collar structure is an alternative to an FEC; therefore, when assessing participation benefits, use the FEC rate as the benchmark, not the spot rate