Fund Y invests in Asian equity markets. The portfolio holdings include Chinese stocks valued at RMB2 million. Currently, the relevant spot exchange rate is MYR/RMB 1.6120 (1 MYR = 1.6120 RMB). You have decided to hedge against the currency risk by using a 3-month RMB/MYR forward contract with the same exchange rate as the spot.

Fund Y invests in Asian equity markets. The portfolio holdings include Chinese stocks valued at RMB2 million. Currently, the relevant spot exchange rate is MYR/RMB 1.6120 (1 MYR = 1.6120 RMB). You have decided to hedge against the currency risk by using a 3-month RMB/MYR forward contract with the same exchange rate as the spot.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 2P: The nominal yield on 6-month T-bills is 7%, while default-free Japanese bonds that mature in 6...

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The nominal yield on 6-month T-bills is 7%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market, 1 yen equals $0,009. If interest rate parity holds, what is the 6-month forward exchange rate?
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