Finance Assignment

BFW2341 S2, 2015: ADDITIONAL INFORMATION ON THE ASSIGNMENT

(as per bolded line below)

Part 1 (10 marks)

As the financial controller of Lu Bang Gali, submit a detailed financial projection of how the company can

manage its risk exposure over the next fiscal period.

Through your contacts in the Malaysian financial market, you have managed to obtain the following

information:

i) Six-month forward rate for MYR/USD is 3.42 - 3.45

ii) Six-month investing/borrowing interest rates in Kuala Lumpur are 7.00 / 8.00% per annum

iii) Six-month investing/borrowing interest rates in U.S. are 3.00 / 4.00 % per annum

Due to financial regulatory restrictions in Malaysia, currency options are not available. The closest

liberalized foreign exchange market is Singapore that has provided the following:

i) Six-month put option on USD is priced SGD0.02/USD at a strike of SGD1.35/USD

ii) Six-month call option on USD is priced SGD0.03/USD at a strike of SGD1.35/USD

iii) Six-month forward rate for MYR/SGD is 2.79 – 2.82.

iv) The spot rate for MYR/SGD is 2.78 – 2.79.