Millau has just sold a Japanese subsidiary for 65 billion yen (JPY65,000,000,000). Because of an impending tax law change, Gide wishes to wait six months before repatriating these funds. Gide plans to invest the sale proceeds in six-month Japanese government securities and hedge the currency risk by using forward contracts. Gide’s research indicates that the yen will depreciate against the euro (EUR) over the next six months. Darc has gathered the exchange rate and interest rate information given in Exhibit 1. The day-count convention is 30/360.
(Institute 409)
| Currency Exchange Rates | Spot | 3-Month Forward | 6-Month Forward | 1-Year Forward |
|---|---|---|---|---|
| US dollars per euro (USD/EUR) | 1.1930 | 1.1970 | 1.2030 | 1.2140 |
| Japanese yen per euro (JPY/EUR) | 133.83 | 133.14 | 132.46 | 131.13 |
| Swiss francs per euro (CHF/EUR) | 1.5540 | 1.5490 | 1.5440 | 1.5340 |
| Annualized Risk-Free Interest Rates (%) | 1 Month | 3 Month | 6 Month | 1 Year |
|---|---|---|---|---|
| Euro area | 2.110 | 2.120 | 2.130 | 2.150 |
| United States | 3.340 | 3.560 | 3.770 | 3.990 |
| Japan | 0.040 | 0.056 | 0.066 | 0.090 |
| Switzerland | 0.730 | 0.750 | 0.760 | 0.780 |
11.If Gide uses a six-month forward currency contract to convert the yen received from the sale of the Japanese subsidiary into euros, the annualized return in euros that Millau will realize is closest to:
0.066%.
2.130%.
2.196%.
此题我有点迷糊，如果完全hedge 的话，那么在本国投资和在本国借款到外国投资再转回本国的收益率应该是一样的，而日本利率是0.066%，欧洲是2.13，如果问题是return in japan 那么答案应该是0.066吗？还是也是2.13%？即如果是0.066%的话，即使完全hedge汇率，日本投资者收益率比欧洲投资者低？
