It's early March 2022 and the Commonwealth Serum Laboratories (CSL) has just started exporting COVID vaccines...
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It's early March 2022 and the Commonwealth Serum Laboratories (CSL) has just started exporting COVID vaccines from its facilities in Melbourne to Europe. This has resulted in an accounts receivable of €5 million due in late June. Its treasury department which is tasked with hedging the resultant exposure due to this transaction, gets the following information from Bloomberg. Spot rate: 158.34 cents per Euro (EUR). EUR 90-day interest rate: 0.40% р.а. AUD 90-day interest rate: 0.20% p.a. Forward rate (90 day): 158.05 cents per EUR. Exercise Price Call Price Put Price (cents/EUR) 4.81 (cents/EUR) 158 cents/EUR 5.00 159 cents/EUR 4.52 4.08 5.33 160 cents/EUR 5.89 (i) What is the minimum net revenue the firm will receive if it uses options contracts? (ii) At what future exchange rate would the cashflow from using options exceed that from using forward contracts? " Your answers to both parts should be detailed and include graphical aids if necessary. It's early March 2022 and the Commonwealth Serum Laboratories (CSL) has just started exporting COVID vaccines from its facilities in Melbourne to Europe. This has resulted in an accounts receivable of €5 million due in late June. Its treasury department which is tasked with hedging the resultant exposure due to this transaction, gets the following information from Bloomberg. Spot rate: 158.34 cents per Euro (EUR). EUR 90-day interest rate: 0.40% р.а. AUD 90-day interest rate: 0.20% p.a. Forward rate (90 day): 158.05 cents per EUR. Exercise Price Call Price Put Price (cents/EUR) 4.81 (cents/EUR) 158 cents/EUR 5.00 159 cents/EUR 4.52 4.08 5.33 160 cents/EUR 5.89 (i) What is the minimum net revenue the firm will receive if it uses options contracts? (ii) At what future exchange rate would the cashflow from using options exceed that from using forward contracts? " Your answers to both parts should be detailed and include graphical aids if necessary.
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Answer rating: 100% (QA)
OPTION HEDGE Receivable5000000 Current spot rate 15834 CentsEUR Receivable will decrease if the rate ... View the full answer
Related Book For
Business Statistics in Practice
ISBN: 978-0077404741
6th edition
Authors: Bruce Bowerman, Richard O'Connell
Posted Date:
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