Solution-Calculate the chinese yuan costs

Calculate the chinese yuan costs

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Reference no: EM133172372

Question - Sing Tao wants to import goods for 2.42 million Australian dollar (A$) and pay to Australian exporter, WA Co., in one year. Sing Tao also wants to minimise its exchange rate risk for the payment of A$2.42 million by taking the money market hedging strategy.

TABLE 1
For Chinese yuan (CNY)
Spot rate	A$0.4748/CNY
One-year forward rate	A$0.5289/CNY
One-year CNY deposit and borrowing rate	7.14%
One-year call options	Exercise price = A$0.56
One-year call options	Premium = A$0.03
One-year put options	Exercise price = A$0.53
One-year put options	Premium = A$0.05

For Australian dollar (A$)
Spot rate	CNY2.7549/A$
One-year forward rate	CNY1.8838/A$
One-year A$ deposit and borrowing rate	4.72%
One-year call options	Exercise price = CNY2.14
One-year call options	Premium = CNY0.2
One-year put options	Exercise price = CNY2.24
One-year put options	Premium = CNY0.12

Required - Calculate the Chinese yuan (CNY) costs using the money market hedging strategy based on the information in Table 1.

Reference no: EM133172372

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Calculate the chinese yuan costs

Reference no: EM133172372

Reference no: EM133172372

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