Please complete Tables 4, 5 and 6 Based on the Scenerio and relevant information provided below.

Table 4: France Import cost with option hedge: (8 marks) Type of Total premium Total cost of Option hedge option (Call cost for Import option In $ (Strike breakeven or put?) plus premium) exchange rate Show answers in this row: Show your Total cost of option workings in in $/ Total Euro the columns value of transaction below the answers Table 5: France: Exchange rate hedges compared: (3 marks) Forward rate Money market hedge Option hedge breakeven locked In exchange rate exchange rate S/E Which hedging technique should be applied? (3 marks) Table 6: Canada export with money market hedge: (8 marks) PV of foreign Converted at s amount with Exchange rate locked currency to be spot to $ for Interest In with transaction borrowed Investment Invested Show answers in this row: Show your workings in the columns below the answersScenario 2: Considering the calculations you have done so far, you need to attend to a number of import transactions Bank applies 360 day-count convention to all currencies. Explanation - e.g. 3 month borrowing rate on $ = for goods that companies in the United States expressed interest in. 2.687%. This is the annual borrowing rate for 3 months. If you only borrow for 3 months the interest rate is The first transaction is for the import of good quality wines from France, since a retail liquor trading chain actually 2.687%/4 = 0.67175% (always round to 5 decimals when you do calculations). Furthermore, note customer in the United States, for who you have been doing imports over the past five years has a very that these are the rates at which your company borrows and Invests. The rates are not borrowing and large order this time. The producer in France informed you that the current cost of the wine that you want Investment rates from a bank perspective. to import is and (2,500,000. The producer in France will only ship goods in three months' time due to Option prices: seasonal differences but payment will have to be conducted six months from now. The second transaction is for the export of 3d printers manufactured in the U.S.A. The country where it will Currencies 3 month options 6 month options be exported to is Canada. The payment of CAD 2,500,000 for the export to Canada will be received twelve months from now. Call option Put option Call option Put option You consider different transaction hedges, namely forwards, options and money market hedges. Strike Premium Strike Premium Strike Premium Strike Premium You are provided with the following quotes from your bank, which is an international bank with branches in in S in S in $ in S all the countries: Forward rates: S/ $1.14399 $0.00174 $1.15088 $0.00174 $1.15010 50.00173 $1.15702 50.00152 Currencies Spot 3 month (90 6 month (180 9 month (270 12 month (360 S/CAD $0.76292 $0.00392 $0.76828 $0.00392 $0.77205 50.00387 SO.77747 50.00387 days) days) days) days) S/ 1.14134 1.14743 1.15354 1.15969 1.16587 Bank applies 360 day-count convention to all currencies. (Students also have to apply 360 days in all calculations). Option premium calculations should include time value calculations based on US S annual S/CAD 0.76465 0.76559 0.77475 0.76748 0.76843 borrowing interest rates for applicable time periods e.g. 3 month S option premium is subject to 2.687%/4 interest rate.) Bank applies 360 day-count convention to all currencies (for this assignment apply 360 days in all calculations). Annual borrowing and investment rates for your company: Country 3 month rates 6 months rates 9 month rates 12 month rates Borrow Invest Borrow Invest Borrow Invest Borrow Invest United States 2.687% 2.554% 2.713% 2.580% 2.740% 2.607% 2.766% 2.633% Europe 0.505% 0.480% 0.510% 0.485% 0.515% 0.490% 0.520% 0.495% Canada 2.177% 2.069% 2.198% 2.090% 2.220% 2.112% 2.241% 2.133%