Omni Advisors, an international pension fund manager, plans to sell equities denominated in Swiss francs (CHF) and purchase an equivalent amount of equities denominated in South African rands (ZAR). Omni will realize net proceeds of 3 million CHF at the end of 30 days and wants to eliminate the risk that the ZAR will appreciate relative to the CHF during this 30-day period. The following exhibit shows current exchange rates between the ZAR, CHF, and the U.S. dollar (USD). Currency Exchange Rates ZAR/USD CHF/USDMaturityBidAsk BidAskSpot6.26816.2789 1.52821.534330-day6.25386.2641 1.52261.528590-day6.21046.2200 1.50581.5115 Calculate the following:The CHF/ZAR cross-currency rate Omni would use in valuing the Swiss equity portfolio. (Round your answer to 9 decimal places.)The current value of Omni’s Swiss equity portfolio in ZAR. (Round your answer to 9 decimal places.)The annualized forward premium or discount at which the ZAR is trading versus the CHF. (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.)

Exchange rates are proportions that are utilized across all global business sectors, including…

Answered: Omni Advisors, an international pension…

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 44QA

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Omni Advisors, an international pension fund manager, plans to sell equities denominated in Swiss francs (CHF) and purchase an equivalent amount of equities denominated in South African rands (ZAR).

Omni will realize net proceeds of 3 million CHF at the end of 30 days and wants to eliminate the risk that the ZAR will appreciate relative to the CHF during this 30-day period. The following exhibit shows current exchange rates between the ZAR, CHF, and the U.S. dollar (USD).

Currency Exchange Rates
	ZAR/USD		CHF/USD
Maturity	Bid	Ask		Bid	Ask
Spot	6.2681	6.2789		1.5282	1.5343
30-day	6.2538	6.2641		1.5226	1.5285
90-day	6.2104	6.2200		1.5058	1.5115

Calculate the following:

The CHF/ZAR cross-currency rate Omni would use in valuing the Swiss equity portfolio. (Round your answer to 9 decimal places.)
The current value of Omni’s Swiss equity portfolio in ZAR. (Round your answer to 9 decimal places.)
The annualized forward premium or discount at which the ZAR is trading versus the CHF. (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.)

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