Twenty-two million Australian dollars sold forward, 14.58 million dollars locked and the uncovered remainder measured: an Iowa dryer maker's GF584 Unit 4 forward contract analysis, worked in full. Searches like "gf 584 unit 4 assignment example", "gf584 unit 4 sample" and "gf584 unit 4 example" land here.
What a finished GF584 Unit 4 forward contract analysis looks like
About four pages with a pricing table, an outcome table and a residual register. Pricing derives forward rates from dollar and Australian deposit rates of 4.05 and 3.60 percent: 0.6627 at three months, 0.6635 at six, 0.6642 at nine and 0.6649 at twelve, the Australian dollar at a small forward premium. Committed dealer orders, 16.0 million Australian dollars for the first quarter and 6.0 million for the second, are sold forward for 10.6038 and 3.9808 million dollars, 20,600 more than converting at today's spot. The outcome table sets the hedge against spot at settlement: 1.385 million better off if the rate falls to 0.60, 0.815 million worse off at 0.70. The residual register sizes what stays open, and a rerun of the earlier measure puts it at 3.20 million of the original 4.30.
How a GF584 Unit 4 example is structured
The analysis begins with the exposure it inherits, the 4.30 million measured earlier, and states which slice of it the forward will address: committed orders only, because a forward on sales not yet made would create a position if dealers bought less. Pricing follows, with interest rate parity written out once and applied at four tenors, and a sentence explaining that the premium reflects the rate differential rather than a forecast. The hedge is then specified by amount, date and rate. The outcome table covers five settlement rates, so the forward's cost in a rising market is as visible as its protection in a falling one. The residual section lists four things the forward leaves: forecast volumes, dealer payment timing, counterparty credit, and the Sydney office's Australian-dollar costs. Each carries a size and a response.
Committed orders only
Sixteen million Australian dollars for the first quarter and six million for the second are backed by dealer orders; everything else stays outside the forward by design.
Parity at four tenors
Deposit rates of 4.05 and 3.60 percent carry a spot rate of 0.6620 to 0.6649 over a year, a premium of 28.8 points that reflects interest rather than a view.
Both directions of the outcome
At 0.60 the forward is worth 1.385 million dollars more than converting at spot; at 0.70 it gives up 0.815 million. Both lines appear in one table.
Seventy-four percent still open
Rerunning the earlier measure with committed amounts removed leaves 3.20 million of the original 4.30, mostly forecast receipts in the second half of the year.
Late dealers and a credit line
Eleven days of late payment would cost about 1,440 to roll the first-quarter contract, and credit line usage of roughly 278,000 across both trades is recorded against the bank's limit.
Where marks go in GF584 Unit 4
Forward analyses in GF584 tend to lose credit on the second half of the prompt, the uncovered part: a paper that prices the forward correctly and then implies the exposure is gone has answered only the easy question. Hedging forecast sales with the same instrument as committed orders is a design error graders flag almost as often, since a shortfall in dealer buying turns the hedge into a speculative position. Forward premiums described as a gain or a cost without the interest differential behind them misread the price. Outcome tables that show only the falling-rate case make the hedge look free. Counterparty exposure is often forgotten, though a forward uses the bank's credit line and ties up capacity. Without a rerun of the risk measure after hedging, there is no way to say how much protection was bought.
Get a GF584 Unit 4 example written to your instructions
Amounts, currencies, settlement dates and any interest rates quoted for Unit 4, together with the prompt and rubric, let the analysis begin. The custom version prices the forward from parity, shows outcomes in both directions and sizes whatever it leaves uncovered; delivery takes 24-48h and the first is free.
GF584 Unit 4 questions, answered
Should the forward cover the whole expected amount?
Usually only the portion that is committed or highly probable. A forward is an obligation to deliver currency, so covering sales that may not happen creates a position of its own if they fall short. Many policies set lower cover ratios for forecast amounts and reserve options for them. State the ratio chosen and the reason behind it.
What happens if the customer pays late?
The forward still settles on its date, so the firm must either deliver currency it has not yet received or adjust the contract. Banks commonly roll the forward to a later date with a short swap, priced from the interest differential over the extra days. The analysis can size that cost and record it as a timing residual.
Is a forward risk-free once signed?
No. It removes exchange rate uncertainty on the covered amount but leaves counterparty risk, the chance the bank cannot perform, and it uses credit capacity the firm may need elsewhere. There is also opportunity cost: if the rate moves favorably, the gain is forgone. A complete analysis names each of these rather than calling the hedge perfect.