Business, 19.05.2021 18:30 vannybelly83

Senior management is concerned about the recent developments in the financial markets. There is a general belief that market volatility has been relatively high, yet it might climb even higher than expected in the near future due to the current global health crisis. You have been asked to conduct a thorough risk assessment of your speculative positions undertaken in question 1. For this purpose, the firm’s foreign currency analyst has provided you with the 2-month benchmark rates of these major currencies: Currency Benchmark Interest Rates 2-Month Benchmark Rates (%)
AUD 2-Month Bank Bill Swap Rates 0.095
GBP 2-Month GBP LIBOR 0.073
CAD 2-Month Treasury Bills 0.150
EUR 2-Month Euro LIBOR- 0.495
NZD 2-Month Bank Bill Yields 0.270
CHF 2-Month CHF LIBOR- 0.744
JPY 2-Month JPY LIBOR- 0.059
USD 2-Month USD LIBOR 0.205
Table 3: Benchmark interest rates on August 22, 2020.
Using the interest rates above, calculate the implied forward bid, ask and mid rates for the currency pairs in Table 4 (next page) [3 Marks]. You must then calculate the value of your FX portfolio at the end of October using the calculated bid/ask rates. Report the expected value of your position in each currency in the position summary in Table 2 [2 Marks]. Finally, you must calculate expected profit/loss (gain or loss over the opening position) on your portfolio in AUD [1 Mark]. The AUD value of the net expected position must be calculated using the estimated mid rates.
Comm / Terms Bid Ask Mid
AUD/USD 0.7162 0.7164 0.7163
AUD/EUR 0.6063 0.6067 0.6065
EUR/AUD 1.6487 1.6490 1.6489
AUD/GBP 0.5470 0.5473 0.5472
GBP/AUD 1.8276 1.8281 1.8279
AUD/JPY7 5.73087 5.76087 5.7508
EUR/USD 1.1809 1.1813 1.1811
GBP/USD 1.3090 1.3095 1.3093
USD/JPY 105.7341 105.7641 105.7541
EUR/GBP 0.9018 0.9023 0.9021
EUR/JPY 124.8795 124.9195 124.8995
GBP/JPY 138.4200 138.4700 138.4500
AUD/CAD 0.9433 0.9441 0.9437
EUR/CHF 1.0746 1.0755 1.0751
GBP/CHF 1.1913 1.1922 1.1918
USD/CHF 0.9101 0.9103 0.9102
USD/CAD 1.3174 1.3178 1.3176
NZD/USD 0.6538 0.6541 0.6540
Table 4: Implied forward rates at the end of October 2020. Mid rate = (bid rate + ask rate)/2
Explain your final portfolio position to the senior manager. Given the implied forward rates for October, discuss whether your speculative positions will generate profits for the company. You must explain ending positions for each currency (and it’s AUD value using mid rates) in your portfolio? Do your portfolio have any exposure to exchange rate risk? What recommendations, if any, will you make to the senior management? [1 Mark].

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 11:30

Fred smithers, a recent college graduate decided to open his own portable juice bar, smithers smoothies, to wheel around newport beach. you, a trusted friend of fred, are a business major that has also recently graduated and agreed to handle the books for a while to get some practical experience and have a favor that you can ask of fred in the future. given the following five transactions concerning the new venture, prepare the necessary journal entries for the transactions, post the journal entries to appropriate t accounts and prepare a trial balance as of the end of the month in order to answer to the necessary may 2: fred invests $12,000 of his own money to start the new company. this money was obtained from a part-time job working at a legal firm while he was in school. may 3: fred spent $5,100 cash to purchase a refrigerated trailer that he can pull behind his car and set up at the beach. under your advice, fred agrees to place the new asset under an account called "equipment." may 6: fred bought $640 of supplies on account from the flav-o-rite confectioners company. because they will last longer than a single accounting period fred agrees to record them as, "supplies" as per your suggestion. may 13: fred sat on the beach for six hours without a single sale and was feeling very down. right before he left, however, a plumber escorting his family reunion along the beach stopped by his stand and bought $800 worth of smoothies for the entire family. under your advice, fred agrees to call this cash revenue, "sales." may 15: excited about his new venture, fred withdraws $350 from the company to take his girlfriend out to dinner. what would be the balance in the cash account at the end of the period following the posting of all the transactions?

Answers: 2

Answer

Business, 22.06.2019 17:00

During which of the following phases of the business cycle does the real gdp fall? a. trough b. expansion c. contraction d. peak

Answers: 2

Answer

Business, 22.06.2019 21:00

Identify whether the statements are true or false by dragging and dropping the appropriate term into the bin provided. long-run economic growth is unlikely to be sustainable because of finite natural resources. in the modern economy, countries that possess few domestic natural resources essentially have no chance to develop economically. finding alternatives to natural resources will be very important to long-term economic growth. in the modern economy, human and physical capital are generally less important in productivity than natural resources. in the 19th century, countries with the highest per capita gdp were nearly always abundant in minerals and productive farming land.

Answers: 1

Answer

Business, 23.06.2019 02:30

Interview notes mike is 50 and made $36,000 in wages in 2017. he is single and pays all the cost of keeping up his home. mike's daughter, brittany, lived with mike all year. brittany's son, hayden, was born in november 2017. hayden lived in mike's home since birth. brittany is 25, single, and had $1,500 in wages in 2017. she is not disabled. mike provides more than half of the support for both brittany and hayden. mike, brittany, and hayden are all u.s. citizens with valid social security numbers. 4. who can mike claim as a qualifying child(ren) for the earned income credit?

Answers: 1

Answer

You know the right answer?

Senior management is concerned about the recent developments in the financial markets. There is a ge...

Questions