Spot and forward rates Anderson Australian Imports has agreed to purchase 10,000

Question

Spot and forward rates

Anderson Australian Imports has agreed to purchase 10,000 cases of Australian beer for 6 million Australian dollars at today's spot rate. The firm's financial manager, Linda Wilson, has noted the following current spot and forward rates:

On the same day, Wilson agrees to purchase 10,000 more cases of beer in 3 months at the same price of 6 million Australian dollars.

What is the price of the beer in U.S. dollars if it is purchased at today's spot rate? Round your answer to the nearest cent.
$  

What is the cost in U.S. dollars of the second 10,000 cases if payment is made in 90 days and the spot rate at that time equals today's 90-day forward rate? Round your answer to the nearest cent.
$  

If the exchange rate for the Australian dollar is 0.9122 to $1 in 90 days, how much will Wilson have to pay for the beer (in U.S. dollars)? Round your answer to the nearest cent.
$  

U.S. Dollar/Australian
Dollar Australian Dollar/U.S.
Dollar Spot 1.0760 0.9294 30-day forward 1.0718 0.9330 90-day forward 1.0636 0.9402 180-day forward 0.6555 1.5256

Explanation / Answer

a) Today's spot rate is $1.0760 per Australian dollar. Hence for 6 million australian dollars, the equivalent US Dollars at spot rate will be USD 6,456,000 (Australian dollars 6 million x $1.0760)

b) For the second 10,000 cases of australian dollars 6 million, the 90 days forward rate is 1.0636 hence the US dollar conversion will be USD 6,381,600.

c) If the exchange rate is 0.9122 AUD to $1 in 90 day, then for 6 million australian dollars, Wilson has to pay $6,577,505 (6 million AUD x 1/0.9122)

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.