Question
In: Finance
How the depreciation of the Chinese yuan against the Australian dollar would affect the cost to...
How the depreciation of the Chinese yuan against the Australian dollar would affect the cost to an Australian company that borrowed Chinese yuan and used the proceeds for an Australian project.
Select one:
a.
Australian company’s cost of borrowing will be lower
b.
Australian company’s cost of borrowing will be higher
c.
Chinese company’s cost of borrowing will be higher
d.
Chinese yuan company’s cost of borrowing will be lower
Solutions
jeff jeffy answered 1 year agoRelated Solutions
An Australian exporter WA Co. will receive 5.04 million Chinese yuan (CNY) from a Chinese importer...
An Australian exporter WA Co. will receive 5.04 million Chinese
yuan (CNY) from a Chinese importer Sing Tao in one year. WA Co.
analyses the different hedging strategies (forward, money market
and options) using the market information in the following Table 1
to minimise its exchange rate risk for the Australian dollar (A$)
cash flow.
TABLE 1
For Chinese yuan (CNY)
Spot rate
A$0.4100/CNY
One-year forward rate
A$0.5769/CNY
One-year CNY deposit and borrowing rate
7.14%
One-year call options
Exercise price...
1. An Australian exporter WA Co. will receive 5.34 million Chinese yuan (CNY) from a Chinese...
1. An Australian exporter WA Co. will receive 5.34 million
Chinese yuan (CNY) from a Chinese importer Sing Tao in one year. WA
Co. analyses the different hedging strategies (forward, money
market and options) using the market information in the following
Table 1 to minimise its exchange rate risk for the Australian
dollar (A$) cash flow.
TABLE 1
For Chinese yuan (CNY)
Spot rate
A$0.3609/CNY
One-year forward rate
A$0.5815/CNY
One-year CNY deposit and borrowing rate
8.34%
One-year call options
Exercise...
An Australian exporter WA Co. will receive 5.34 million Chinese yuan (CNY) from a Chinese importer...
An Australian exporter WA Co. will receive 5.34 million Chinese
yuan (CNY) from a Chinese importer Sing Tao in one year. WA Co.
analyses the different hedging strategies (forward, money market
and options) using the market information in the following Table 1
to minimise its exchange rate risk for the Australian dollar (A$)
cash flow.
TABLE 1
For Chinese yuan (CNY)
Spot rate
A$0.4696/CNY
One-year forward rate
A$0.5454/CNY
One-year CNY deposit and borrowing rate
8.13%
One-year call options
Exercise price...
An Australian exporter WA Co. will receive 5.34 million Chinese yuan (CNY) from a Chinese importer...
An Australian exporter WA Co. will receive 5.34 million Chinese
yuan (CNY) from a Chinese importer Sing Tao in one year. WA Co.
analyses the different hedging strategies (forward, money market
and options) using the market information in the following Table 1
to minimise its exchange rate risk for the Australian dollar (A$)
cash flow.
TABLE 1
For Chinese yuan (CNY)
Spot rate
A$0.4696/CNY
One-year forward rate
A$0.5454/CNY
One-year CNY deposit and borrowing rate
8.13%
One-year call options
Exercise price...
An Australian exporter WA Co. will receive 5.67 million Chinese yuan (CNY) from a Chinese importer...
An
Australian exporter WA Co. will receive 5.67 million Chinese yuan
(CNY) from a Chinese importer Sing Tao in one year. WA Co. analyses
the different hedging strategies (forward, money market and
options) using the market information in the following Table 1 to
minimise its exchange rate risk for the Australian dollar (A$) cash
flow.
TABLE 1
For Chinese yuan (CNY)
Spot rate
A$0.4075/CNY
One-year forward rate
A$0.6000/CNY
One-year CNY deposit and borrowing rate
7.35%
One-year call options
Exercise price...
a. The Australian dollar against the US dollar (and against other major currencies) has appreciated in...
a. The Australian dollar against the US dollar (and against
other major currencies) has appreciated in recent months (mid-March
2020 to early June 2020). Identify the underlying drivers and the
implications of this rising exchange rate in Australia.
If the Chinese yuan has a floating exchange rate with the US dollar, US multinationals have...
If the Chinese yuan has a floating exchange rate with the US
dollar,
US multinationals have no economic exposure
Chinese exporting firms do not face currency risk
Currency risk can lead to economic exposure
Assume that the spot exchange rate between U.S. Dollar and Chinese Yuan is $1 = 6.90...
Assume that the spot exchange rate between U.S. Dollar and
Chinese Yuan is $1 = 6.90 yuans
Compute the direct exchange rate between U.S. $ and Chinese
yuan (i.e., value of 1 yuan in $). b)At this exchange rate, how
much would a HP laptop which costs $725 in Houston cost in Beijing?
(Ignore the costs of shipping and handling and any tariff) c,Assume
that on pressure from the Trump administration, China agrees to let
yuan appreciate by 15%. What...
Which of the following will cause the Australian dollar (AUD) to depreciate against the US dollar...
Which of the following will cause the Australian dollar (AUD) to
depreciate against the US dollar (USD)?
A) An increase in Australian demand for US electronics.
B) A decrease in the Australian price level
C) An increase in the Australian interest rate
D) Expected appreciation of the Australian dollar against the US
dollar amongst currency traders
E) An increase in US demand for Australian coal.
4. Why do you think the Chinese government originally pegged the value of the yuan against...
4. Why do you think the Chinese government originally pegged the
value of the yuan against the U.S. dollar? What were the benefits
of doing this to China? What were the costs? What do you think the
Chinese government should do? Let the float, maintain the peg, or
change the peg in some way?
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