A large Australian company wishes to raise short-term capital and decides to do so in the US short-term money market (STMM) because interest rates in the US are lower than in Australia. It issues a 90-day USD $1,000,000 FV Corporate Note which is promptly bought by a US investor. The Australian company decides not to re-finance the Note and will have a USD $1,000,000 liability pay in 90 days using it’s AUD earnings.

Which of the following currency movements is not beneficial to the Australian company? (select multiple answers if correct)

 Continuing from Q1(c)...

You are exchanging half of the AUD $1,000 you have brought with you, how much THB will you receive?

(enter you answer as an integer (whole number) only without units or , ).

How many Telstra bonds can you buy?

2 years have passed and you decide to sell the bonds on the secondary market.

Another investment fund, Eastern Cross Securities, wishes to buy your bonds and they have a YTM of 5% p.a.

What is the price that they will pay?

(hint: ID the values for substitution into the bond formula. FV = Face Value, it does not change. y = buyer's yield, this has changed. C =fixed and does not change from before. n = number of payments remaining. The bonds originally had 5 years to maturity. You have held them for 2 years. How many semi-annual payments remain?)

(enter your answer without $ or , to 2 decimal places)

As an investment manager of Southern Cross fund, you have $5 million in capital to purchase debt securities; $3 million for money market securities and $2 million for bonds.

Having finished your money market purchases, you move on to buying bonds.

Telstra is selling 5 year bonds at a face value of $1,000,000 which pay a semi-annual coupon of 6% p.a.

You require a yield-to-maturity (YTM) of 7% p.a. on Telstra's bonds, what price are you willing to pay for each Telstra bond?

(enter your answer without $ or , to 2 decimal places)

As an investment manager of Southern Cross fund, you have $5 million in capital to purchase debt securities; $3 million for money market securities and $2 million for bonds.

Telstra is selling 90 day promissory notes at a face value of $100,000 for which you require a yield of 3% p.a.

What price are you willing to pay for each Telstra security?

(enter your answer without $ or , to 2 decimal places)

After holding the notes for 30 days, you decide to sell the notes on the secondary market.

Another investment fund, Eastern Cross Securities, wishes to buy your notes and they have a yield of 4% p.a.

What is the price that they will pay?

(hint: ID the values for substitution into the discount security formula. FV = Face Value, it does not change. y = buyer's yield, this has changed. n = number of days to maturity. The original notes had 90 days to maturity. You have held this for 30 days. How many days to maturity remain?)

(enter your answer without $ or , to 2 decimal places)

How many Telstra notes can your fund buy?

T10 KCT 7 (Tutorial)

An Australian farmer places an order today, to buy farm equipment from a supplier in China with a 1 month settlement of 1 million CNY (Chinese Yuan).

The current spot rate is: AUD/CNY 4.77/4.88

Which of the following exchange rate movements at settlement provides downside risk for the farmer, given that AUD will be exchanged into CNY?

(select all correct answers only, selecting the wrong answer will result in a mark penalty. selecting all answers will result in 0)

T10 EIC 5 (Tutorial)

You are at Changi Airport, flying from Singapore to Melbourne (Australia) and wish to exchange 1,000 SGD (Singapore dollars) into AUD before your flight.

You see two foreign exchange rate dealers who are quoting: 

SuperRich Dealer:       SGD/AUD    1.2189/1.2194 

SuperCheap Dealer:    SGD/AUD    1.3189/1.3194 

Which dealer should you transact with and how much AUD will you receive?