In 2020, Jan purchased $10,000 worth of Chinese securities at 6.70CNY per SUS with an expected...

Transcribed Image Text:

In 2020, Jan purchased $10,000 worth of Chinese securities at 6.70CNY per SUS with an expected 5% returns on the investment after one year. Instead, she could have purchased $10,000 worth of US securities with an 8% returns after one year. 1. Briefly explain why Jan was exposed to foreign exchange risk. Be specific. 2. Jan had a choice to hedge her foreign exchange risk in the futures market using the information in the table below. June 2020 June 2021 Spot Price 6.70CNY/$ Sell: 6.40 Futures Price Sell: 6.75CNY/1$ Buy: 6.65 1)How much US$ would she receive with a hedge? 2)How much USS would she receive without a hedge? 3.Knowing your answers in 2, would she have been better off investing in US securities instead, and why? In 2020, Jan purchased $10,000 worth of Chinese securities at 6.70CNY per SUS with an expected 5% returns on the investment after one year. Instead, she could have purchased $10,000 worth of US securities with an 8% returns after one year. 1. Briefly explain why Jan was exposed to foreign exchange risk. Be specific. 2. Jan had a choice to hedge her foreign exchange risk in the futures market using the information in the table below. June 2020 June 2021 Spot Price 6.70CNY/$ Sell: 6.40 Futures Price Sell: 6.75CNY/1$ Buy: 6.65 1)How much US$ would she receive with a hedge? 2)How much USS would she receive without a hedge? 3.Knowing your answers in 2, would she have been better off investing in US securities instead, and why?

Answer rating: 100% (QA)

1 Jan was exposed to foreign exchange risk because she initially invested in Chinese securities deno... View the full answer