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*Note : Required more explanation of facts. All are based on Astra International TBK (Indonesian company). Requiring more explanation about the company. Need explanation for 2 to 3 pages for each and every question.

(1) Evaluate the suitability and the effectiveness of the hedging tools used by the company in

managing the risks identified by you.

(10 marks)

Hedging is tehnique t redue exsure t mesurble tyes f risk in finnil mrket trnstins. It

is tye f insurne, nd while it nnt eliminte risk mletely, hedging n mitigte the effet. The

rret hedging tls will deend n the tyes f ssets r trnstins invlved. Fr exmle, fr

rtfli ntining interntinl investments, it wuld be rudent t hedge ginst unexeted

urreny mvements, in rder t reserve the vlue f the rtfli in the hme urreny. The min

tyes f hedging tls inlude futures, tins, nd frwrds whether n ne f the underlying ssets

in the rtfli, in urreny index, r n sset negtively rrelted with the rtfli.

In the mny Hedging urreny risk is dne with frwrd ntrts, futures, r tins. Fr

mny like str with interntinl ertins, the use f urreny hedging tls is very imrtnt

when nverting freign ertin rfits int the hme urreny, r urhsing inuts r equiment

verses. Frwrd ntrts re unique t the freign exhnge mrket, nd llw mny r

investr t lk in seifi trnstin t exhnge ne urreny fr nther n rtiulr dte.

Unlike futures ntrts, urreny frwrd ntrt is nt stndrdized r trdeble, nd if ne rty

defults, the ther rty is mletely ut f luk. Futures ntrts reresent less risky lterntive t

hedging ginst urreny mrket flututins. Deending n the diretin nd the munt f vltility in

the urreny mrket, the mny will hse futures r tins r mix f bth deending n

the seifi urrenies invlved. mney mrket hedge is nther tye f hedging tl fr future freign urreny trnstin. Fr instne, if Frenh mny wnts t sell equiment t Jn, it n brrw in yen nw, nd y the yen-denminted debt when the Jnese mny ys fr the rduts. This llws the Frenh

mny t lk in the urrent exhnge rte between the Eur nd the yen. The st is the interest

rte n the yen ln, whih is my be lwer thn the st f nther hedging tl.

(2) Identify the global impacts of low or negative interest rate on the company.

(10 marks)

Negtive interest rtes re used by entrl bnks t inrese brrwing in times f enmi reessin.

By ffering negtive interest rte, the entrl bnk. dereses the verll enmy-wide st f

brrwing, iming t inrese enmi tivity thrugh inresed investment nd nsumtin

sending.

The term negtive interest rte refers t interest id t brrwers rther thn t lenders. entrl bnks

tyilly hrge mmeril bnks n their reserves s frm f nn-trditinl exnsinry mnetry

liy, rther thn rediting them. This is very unusul senri tht generlly urs during dee

enmi reessin when mnetry effrts nd mrket fres hve lredy ushed interest rtes t

their nminl zer bund. This tl is ment t enurge lending, sending, nd investment rther thn

hrding sh, whih will lse vlue t negtive desit rtes.

In negtive interest rte envirnment, the entire mny n be imted beuse the nminl

interest rte dis belw zer. s suh, string sh inurs fee rther thn erning interest, whih

mens tht nsumers nd bnks hve t y interest in rder t desit mney int n unt.

(3) Analyse the financial market segmentation of equity market of Indonesia and how the

segmentation affects the Astra International TBK company generally.

(20 marks)

Market segmentation has enabled Astra international to develop a better understanding of the

dynamics and statistics of the smaller market segments. Also, helping in handling better their target

consumers. Moreover, Segmentation has enabled the company to target different customers from

different groups by adapting their services and marketing collateral to suit their targeted segment, which

is the best for them. Astra International has now increased clarity, developed consumer credibility and

accountability, improved cost efficiency, brand loyalty, and grown its customer engagements and

capabilities as well as ever before.

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