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Illustrative Examples
(All figures shown below including the exchange rate of AUD/HKD, interest rate of “MaxiInterest” Investment Deposit and interest rate of time deposit are for illustration only. Please refer to the Bank for up-to-date information.)
If investors take a bullish view on Australian dollar, and expect the exchange rate of AUD/HKD to increase, thus they can setup a MaxiInterest Investment Deposit with HKD100,000 as Principal Amount for one week, taking AUD as the Linked Currency.
| Deposit Currency: HKD |
Principal Amount: HKD100,000 |
Deposit Period: 1 week |
| Linked Currency: AUD |
Spot Rate: AUD/HKD: 5.0550 |
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Example 1 – Spot Rate as Initial Exchange Rate
Initial Exchange Rate: AUD/HKD 5.0550
Interest Rate of Deposit: 18.50% p.a.
| Final Exchange Rate Fixing Date |
Annual Return |
Currency received |
Principal and Interest Returns received |
| Scenario 1 : |
AUD/HKD increases along with investors’ expectation (e.g. AUD/HKD is 5.0980) |
|
18.50% |
Deposit Currency
(HKD) |
HKD100,000 + HKD100,000 x 18.50% x 7/365
=HKD100,354.79
(paid in Deposit Currency) |
| Scenario 2: |
AUD/HKD equals to Initial Exchange Rate (i.e. AUD/HKD is 5.0550) |
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| Scenario 3 : |
AUD/HKD decreases against investors’ expectations (e.g. AUD/HKD is 5.0120) |
|
-26.01%* |
Linked Currency
(AUD) |
(HKD100,000 + HKD100,000 x
18.50% x 7/365) / 5.0550
= AUD 19,852.58
(paid in Linked Currency) |
| * |
If customer chooses to convert the amount to HKD at the prevailing exchange rate of 5.0120, the amount received would be HKD99,501.13, which represents a loss of HKD498.87. |
Example 2 – Customised Initial Exchange Rate
Initial Exchange Rate: AUD/HKD 5.0385
Interest Rate of Deposit: 11.375% p.a.
| Final Exchange Rate Fixing Date |
Annual Return |
Currency received |
Principal and Interest Returns received |
| Scenario 1 : |
AUD/HKD increases as investor expected (e.g. AUD/HKD is 5.0980) |
|
11.375% |
Deposit Currency
(HKD) |
HKD100,000 + HKD100,000 x 11.375% x 7/365
=HKD100,218.15
(paid in Deposit Currency) |
| Scenario 2: |
AUD/HKD equals to Initial Exchange Rate (i.e. AUD/HKD is 5.0385) |
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| Scenario 3 : |
AUD/HKD decreases against investors’ expectations (e.g. AUD/HKD is 5.0120) |
|
-16.11%# |
Linked Currency
(AUD) |
(HKD100,000 + HKD100,000 x
11.375% x 7/365) / 5.0385
= AUD 19,890.47
(paid in Linked Currency) |
| # |
If customer chooses to convert the amount to HKD at the prevailing exchange rate of 5.0120, the amount received would be HKD99, 691.04, which represents a loss of HKD308.97. |
A Comparison between the return from "MaxiInterest" Investment Deposit and the return from a HKD Time Deposit (The following examples are for reference only)
Based on the above example 1, the comparison with Time Deposit is as follows:
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Scenario on the Final Exchange Rate Fixing Date |
Tenor |
Effect on Movement of relevant Exchange Rate to Return |
Annual Return / Time Deposit Interest Rate |
Principal |
Principal and Interest Returns received |
| "MaxiInterest" Investment Deposit |
Exchange rate moves with investor's anticipation |
1 week |
Investor receive the Principal and Interest Returns paid in the Deposit Currency |
18.50% |
HKD100,000 |
HKD100,000 + HKD100,000 x 18.50% x 7/365
=HKD 100,354.79 |
| Exchange Rate moves against investor's anticipation |
1 week |
Investor receive the Principal and Interest Returns paid in the Linked Currency |
-26.01% |
HKD100,000 |
(HKD100,000 + HKD100,000 x 18.50% x 7/365)
/ 5.0550
= AUD 19,852.58
= HKD 99,501.13^ |
| Traditional Time Deposit |
HKD Time Deposit
(Assumed interest rate: 0.01%p.a.) |
1 week |
No effect |
0.01% |
HKD100,000 |
HKD100,000 + HKD100,000 x 0.01% x 7/365
= HKD100,000.19 |
| ^ |
If customer chooses to convert the amount to HKD at the prevailing exchange rate of 5.0120. |
Date: March 2009
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