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stion 3 Recently (early January) you spoke to your parents lives in Australia who seems to have lots of money and they wanted to put
stion 3 Recently (early January) you spoke to your parents lives in Australia who seems to have lots of money and they wanted to put all their money in a saving account in a local bank in Australia. They have $25.450.000 and plan to invest the money in a 90 day (3 months) with a fixed interest rate (Bank Bi). You are concerned that the yields might fall and believe your parents will be able to protect their returns by hedging with 90 day Bank Bil utures on the SFE (Traded on the Australian Securities Exchange). At the end of December, the March Bank Bill futures contract is trading at 95.45, and Bank Bill yields are 4.55%. (Each Bank Bill Futures contract is valued as $1.000.000) a) What is the risk your parent will have be concerned and effects will that risk have on their investment? (2 Marks) b) How would you construct a hedge using SFFE Bank Bill Futures in lanuary
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