As a consultant you were hired by Mary to provide them with a summary report on exchange rate fluctuations and expectations. For the report you first decide to establish an exchange forecasting model which will be able to predict the six months ahead spot rate. Using the forecast and provided market data, you are tasked to search opportunities to hedge, speculate, or take arbitrage of the current financial market for the next six months. For each opportunity you should provide a justification of why the positions should be taken and how it would benefit Banon Co.. Assume that the date today is 31/Mar/2021.
In your 2,000 word report you are to provide information of the following:
Explain the prediction model(s) you have established.
Explain how you collected the data for the models and what issues you faced in selecting the data.
Provide a prediction for the USD/AUD spot exchange rate for 31/Sep/2021 (six months from now)
How should Banon Co. hedge the transaction exposure of US$5,000,000 receivable in six months?
Provide one speculative opportunity that Banon Co. can take today with an investing period of six months.
What is the cheapest way to raise capital through debt or swaps for Banon Co. to purchase the materials worth AU$3,000,000?
