A customer of a bank has $275 000
(WEEK 8):a) A customer of a bank has $275 000 in surplus funds that need to be investedfor a short period of time. The bank offers to sell a 90-day negotiablecertificate of deposit to the customer at a yield of 6.45 per cent per annum.Calculate the face value of the security and advise the customer of the dollarreturn on the CD.(WEEK 10):An investor enters into a long call option on Boral Limited shares with anexercise price of $7.25 per share in two months, and pays a premium of $0.70per share.a) Calculate the break-even price for the short-call position.b) Draw a fully labelled diagram of the long-call and short-call positions.c) At what minimum stock price will the option buyer exercise the option on theexpiration date?(WEEK 10):An Australian company is exporting iron ore to Japan. The company has areceivable of JPY5 000 000 due in three monthsâ time. The companyapproaches its bank and enters into a forward exchange contract. The spotrates are quoted as 1AUD/JPY82.35â40, forward points 7â5. (10 marks)a) What is the three month bid/ask forward rate?b) What transaction should the Australian company take to hedge their position?c) How much will the Australian company receive (in Australian dollar) if theyhedge their position. How much will they receive if they do not hedge and thefuture spot rate is 1AUD/JPY82.01â 06.d) In part c, which option is better for the Australian firm? Why would theyhedge?
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