(ii) convert the USD to AUD in spot market (this allows you to know how much AUD you will get for the receivable‚ therefore hedged) (iii) The future value of this AUD is equivalent to the USD receivable‚ an implied forward rate is obtained. (b) To hedge import payable in USD (i) borrow AUD (pay AUD interest rate) (ii) convert the AUD in spot to USD (iii) invest the USD to earn USD interest. This will give sufficient USD later to make payment
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the cost per USD is CAD 0.90; the parity case that the cost per USD is CAD 1.00; and the pessimistic case that the cost per USD is CAD 1.10. See attached. 3. What is the total CAD cost at the end of January of the required USD if Pionix hedges forward? (A sentence or two. Show details in an exhibit.) See attached. 4. Show how the total CAD cost at the end of January of hedging with an option varies under the three scenarios. (The total cost includes what you pay for the USD and what you pay
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this risk‚ AIFS has to hedge their currency exposure. At the moment the company hedges 100% of their exposure using forward contracts and currency options. Now Becky Tabaczynski‚ CFO of one of the main divisions‚ is creating a model‚ including different scenarios‚ with the goal of identifying which proportion of the exposure should be hedged at all and in which proportion forward contracts and currency options should be used for hedging. Not hedging at all could have disastrous consequences for
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treasurer of Apple has an extra cash reserve of USD 100.000.000 to invest for six months. The six-month interest rate is 8 % per annum in the U.S. and 7 % per annum in Germany. Currently‚ the spot exchange rate is USD/EUR = 1.01 and the sixmonth forward exchange rate is USD/EUR = 0.99. The treasurer of Apple does not wish to bear any exchange risk. Where should he/she invest to maximize the return? Investing in the US | Amount in USD | US | Amount in USD | | | 100.000.000‚00 | 1‚0399 | 103
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the one-year forward rate is $.60 x 1 + -.036= $.5784. You will need 10‚000‚000 x $.5784 = $5‚784‚000. Q-33 Answer; $100‚000 x 0.90 = 90‚000 90‚000/0.68 = C$132‚353 C$132‚353 x $.70 = $92‚647 Profit = $92‚647 - $100‚000 = -$7‚353 loss.. Questions from Chapter 8 Q-8 Answer ; Interest rate parity can be evaluated using data at any one point in time to determine the relationship between the interest rate differential of two countries and the forward premium. PPP
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Summer project On Foreign Exchange Risk Management By Paresh S. Mahajan Atharva Institute of Management Studies Marve Road‚ Malad (W)‚ Mumbai – 4000 95. July 2005 Summer project On Foreign Exchange Risk Management By Paresh S. Mahajan
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1. (a)What are the derivative instruments that the company uses? Overall utilization of derivative instruments by AirAsia is for both purposes of hedging and held for trading. For instance using certain derivative instrument to hedge a particular or contingent risk associated with a recognized asset and liability and highly probable forecast transaction. Derivative instrument are recognized at fair value when parties are entered into contract and subsequently are measured at their fair value
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Ruhnau had several financial hedging options to undertake in order to minimize Lufthansa’s foreign exchange exposure risk for the next 12 months. These financial instruments include the basic hedging alternatives such as remaining uncovered‚ use of forward contracts with either partial or full coverage‚ matching of currency with cash inflows of U.S. dollars‚ foreign currency options or buy and invest in U.S. dollars now. Given the various hedging alternatives‚ Lufthansa could ideally choose any of
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perspectives Be able to analyze features of practical financial instruments Develop skills in designing financial products Xingguo Luo (ZJU) Financial Engineering (2013) Lecture 1: Feb 28‚ 2013 4 / 45 Course introduction Candidate topics Forward contracts Cash flow engineering Swap engineering Repo Synthetics Options Fixed-income engineering Volatility trading CDS Structured product engineering Xingguo Luo (ZJU) Financial Engineering (2013) Lecture 1: Feb 28‚ 2013 5 / 45 Course
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Solutions End-of-Chapter Questions and Problems to accompany Multinational Finance by Kirt C. Butler Fourth Edition (2008) John Wiley & Sons PART I Overview and Background * Chapter 1 An Introduction to Multinational Finance * Answers to Conceptual Questions * 1.1 List the MNC’s key stakeholders. How does
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