The first transaction is for the import of good quality wines from Australia, 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 Australia informed you that the current cost of the wine that you want to import is AUD$2,500,000. The producer in Australia will only ship goods in three months' time due to seasonal differences but payment will have to be conducted six months from now. Forward rates: Currencies Spot 3 month (90 6 month (180 9 month (270 12 month (360 days days days $/CAD 0.76465 0.76559 0.77475 0.76748 0.76843 $/AUD 0.72390 0.72516 0.72641 0.72766 0.72892 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% Canada 2.177% 2.069% 2.198% 2.090% 2.220% 2.112% 2.241% 2.133% Australia 1.973% 1.875% 1.992% 1.894% 2.012% 1.914% 2.031% 1.933% (Ctrl) - a. Calculate the cost of money market hedges for the imports from Australia (Complete Table 3 on the separate answer sheet) Table 3: Australia import cost with money market hedge: (8 marks) Converted at spot to Exchange rate PV of foreign currency $ and to be $ amount to be locked in with to be invested borrowed repaid after period transaction Show answers in this row: Show your workings in the columns below the answers