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Suppose UNSW is contracting with 3M to purchase 20000 face masks for its staff and students from the United States. UNSW and 3M decide to
Suppose UNSW is contracting with 3M to purchase 20000 face masks for its staff and students from the United States. UNSW and 3M decide to share currency risk. As part of the risk sharing arrangement they set a base rate of USD 0.75/AUD. There is a neutral zone that spansUSD 0.7125/AUD to USD 0.7875/AUD. Exchange rate movement outside of this neutral zone is shared equally. Suppose the rate at maturity is USD 0.9/AUD. What is the realized contractual exchange rate at which they transact?
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