Anderson Australian Imports has agreed to purchase 15,000 cases of Australian wine for 4 million Australian dollars

Question:

Anderson Australian Imports has agreed to purchase 15,000 cases of Australian wine for 4 million Australian dollars at today's spot rate. The firm's financial manager, Hinda Wilson, has noted the following current spot and forward rates:
.........................Australian Dollar / Canadian Dollar
Spot ...................... 0.9297
30-day forward ......... 0.9300
90-day forward ........ 0.9400
180-day forward ....... 0.9500
On the same day, Wilson agrees to purchase 15,000 more cases of wine in 3 months at the same price of 4 million Australian dollars.
a. What is the price of the wine in Canadian dollars if it is purchased at today's spot rate? b. What is the cost in Canadian dollars of the second 15,000 cases if payment is made in 90 days and the spot rate at that time equals today's 90-day forward rate?
c. If the exchange rate for the Australian dollar is 0.90 to $1 in 90 days, how much will Wilson have to pay for the wine (in Canadian dollars)? Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial Management Theory and Practice

ISBN: 978-0176517304

2nd Canadian edition

Authors: Eugene Brigham, Michael Ehrhardt, Jerome Gessaroli, Richard Nason

Question Posted: