Answer Happy

Question 3 (35 Marks) A premium chocolate manufacturing company in South Africa imports its cocoa supplies from Ghana. You have been approached by them to help them manage their transaction exposure relating to the Ghanaian Cedi (GHS). PAYABLE (GHS) 500,000 DAYS 136 SPOT RATE (ZAR/GHS) 2.4 FUTURES RATE (ZAR/GHS) 2.85 COUNTRY DEPOSIT (annual) LOAN (annual) South Africa 6.20% 7.50% Ghana 12.65% 15.00% OPTION: ZAR/GHS PUT CALL EXERCISE PRICE PREMIUM 2.8 0.5 3.1 0.63 ZAR/GHS PROBABILITY 2.65 20% 2.90 30% 3.22 50% Assume there are 365 days in a year a) Using information in the above tables, present the costs hedging using the money market hedge and the steps to be followed in implementing the hedge (14 Marks) b) Using information in the above tables, present the costs hedging using options (15 Marks)