chamberlain Canadian imports has agreed to purchase 15000 cases of Canadian beer

Question

chamberlain Canadian imports has agreed to purchase 15000 cases of Canadian beer for 4 million Canadian dollars at today's spot rate. The firm's financial manager, James Churchill, has noted the following current spot and forward rates: US Dollars/Canadian Dollar Canadian Dollar/Us Dollar
Spot 1.0526 0.9500
30 day forward 1.0504 0.9520
90 day forward 1.0471 0.9550
180 day forward 1.0444 0.9575

on the same day churchill agrees to purchase 15,000 more cases of more beer in 3 months at the same price of 4 million Canadian dollars.
a. what is the price of beer in US dollars if it is purchased at today's spot rate?
b. what is the cost in US dollars of the second 15000 cases if payment is made within 90 days and the spot rate at the time equals today's 90 day forward rate?
c. If the exchange rate for the Canadian dollar is 0.90 to $1 in 90 days, how much will Churchill have to pay for the beer (in US dollars)?

Explanation / Answer

a.4000000/0.95 = $4210526.32 b.4000000/0.955 = $4188481.675 c.If the exchange rate is 0.9 to $1 when payment is due in 3 months, the C$4000000 will cost: 4000000/0.9 = $4444444.44

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