Question: You work for J.P. Morgan Chase, a large U.S. bank. One of your customers is Lianhua Supermarket Holdings , a leading Chinese grocery chain, which

You work for J.P. Morgan Chase, a large U.S. bank. One of your customers is Lianhua Supermarket Holdings , a leading Chinese grocery chain, which has recently made a large purchase of maple syrup from a Canadian supplier. The payment of 1.5 million Canadian dollars (CAD) is due in 3 months time. The grocery chain would like to buy the Canadian currency forward in exchange for Chinese yuan (CNY), so as to hedge the value of its liability. Your banks foreign exchange desk provides the following bid-ask quotes spot and forward against the US dollar (USD):

	Bid	Ask
Chinese yuan spot (CNY per USD)	6.1549	6.1554
3-month forward points	183.0	149.0
	0.0183	0.0149
3-month forward price	6.1732	6.1703
Canadian dollar spot (CAD per USD)	1.1054	1.1060
3-month forward points	23.95	24.84
	0.002395	0.002484
3-month forward price	1.107795	1.108484

At these quotes, what price would you give to your client, the Chinese company who wishes to buy Canadian dollars from the bank? How much has the Chinese company agreed to pay in 3 months time? Show your calculations.

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