Suppose that this transaction is denominated in yuan

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Reference no: EM131873595

The current Nov. ’17 forward rate for the Chinese Yuan (CNY) against the U.S. Dollar ($) is CNY 6.7/$. Your firm has a large expense in China coming up (CNY 3 million) and you want to lock in your dollar cost.

A. Suppose that this transaction is denominated in Yuan, and the future is not deliverable. That is, the future is cash-settled. What is the notional value of the future you would ideally like? For future questions, assume that you can have this exact amount.

B. If the true exchange rate at maturity is CNY 7.14/$, what will be the profit or loss in yuan?

C. What will be the profit or loss in dollars?

Reference no: EM131873595

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