Question

1. An importer from Australia agrees to make a contract with software company in New Zealand....

1. An importer from Australia agrees to make a contract with software company in New Zealand. He agrees for payment of NZD 200000 on August 1. The importer wishes to hedge against an unexpected appreciation in the NSD relative to AUD. The exchange rate in spot market is NZD1.83155/AUD. Since NZD will be paid in August, the importer uses future contract at NZD 1.82355/ AUD. In International Monetary Market, the standardized terms are given as below

Contract Size: NZD 50000, Delivery Date: September

You required to determine Gain or loss to the Omani (OMR) Importer.

        i.            On maturity date the spot rate between NZD and AUD is NZD 1.81335/AUD.

      ii.            On maturity date the spot rate between NZD and AUD is NZD 1.83435/AUD.

(please I WANT the perfect answer)

2. A French trader imports goods from London. The following market rates prevail:

EURO/USD= 1.18/ 1.19; GBP/USD= 0.69/0.70. Find the EURO/ GBP exchange rate.

(please I WANT the best answe )

3. The current exchange rate is YEN 122/ USD. If inflation in japan is 2 percent and that in USA 3 percent, calculate the expected exchange rate after one year.

(please WRITE THE BEST AND CAREFUL answer)

thank you

Homework Answers

Answer #1

You have asked multiple unrelated questions in the same post. I have addressed the first one. Please post the balance questions separately one by one.

Q - 1

Number of contracts required, N = Amount payable / Contract size = A / S = 200,000 / 50,000 = 4

Forward rate, F =  NZD 1.82355/ AUD

Sub part (i)

Spot rate, S = NZD 1.81335/AUD

Hence, gain = A / S - A / F = (200,000 / 1.81335 - 200,000 / 1.82355) = AUD  616.9228

Hence, Gain to the Omani (OMR) Importer = AUD 616.9228 (Please do round it off as per your requirement)

Sub part (ii)

Spot rate, S = NZD 1.83435 /AUD

Hence, loss = A / F - A / S = (200,000 / 1.82355 - 200,000 / 1.83435) = AUD  645.7343

Hence, loss to the Omani (OMR) Importer = AUD 645.7343  (Please do round it off as per your requirement)

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