Foreign Currency Date Current Spot Rate in European terms: FX per 1 US dollar Si
ID: 2820010 • Letter: F
Question
Foreign Currency
Date
Current Spot Rate in European terms: FX per
1 US dollar
Six -Month Forward Rate in European terms: FX per 1 US dollar
Australia
AUD
Australian dollar
9/19/18
Spot Price (AUD): 0.7285
AUD
Sell Amount: 1.37
Forward Rate: 1.3744
At the current spot rate, how much in the foreign currency are you owed in 6 months?
Assuming you fully hedge your FX exposure in the forward market, how many US dollars will you receive in 6 months?
Is the foreign currency selling in the forward market at a premium, i.e. it appreciates relative to the spot rate, or a discount, i.e., it depreciates relative to the spot rate? Provide numbers to support your answer.
Foreign Currency
Date
Current Spot Rate in European terms: FX per
1 US dollar
Six -Month Forward Rate in European terms: FX per 1 US dollar
Australia
AUD
Australian dollar
9/19/18
Spot Price (AUD): 0.7285
AUD
Sell Amount: 1.37
Forward Rate: 1.3744
Explanation / Answer
At the current spot rate, how much in the foreign currency are you owed in 6 months Assuming the US dollar available is $1000000 1 US Dollar - AUD 0.7285 AUD amt - 1000000*0.7285 728500 AUD At current spot rate, foreign currency would be 728500 AUD Assuming you fully hedge your FX exposure in the forward market, how many US dollars will you receive in 6 months? Foreign currency owed as above AUD 728500 728500/1.3744 530049.5 Is the foreign currency selling in the forward market at a premium, i.e. it appreciates relative to the spot rate, or a discount, i.e., it depreciates relative to the spot rate? Provide numbers to support your answer. 0.7285/1.3744 0.530049 The foreign currency depreciates to the spot rate
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