Question: a. Given the figures below, quantify the forward premium or discount: Spot $1.4615/ 1 month forward $1.4600/. b) 5 million Ghana cedis has to be

a. Given the figures below, quantify the forward premium or discount:

Spot $1.4615/ 1 month forward $1.4600/.

b) 5 million Ghana cedis has to be paid for supplies received by an American company. Today, the cedi appreciates by 3% against the dollar. The American company can pay today to avoid any additional increase tomorrow. However, the company has determined that an appreciation of the cedi against the dollar by more than 1% is normally followed by a reversal of about 60% the following day. What should the company do?

c) Assume US inflation is expected to be 1% over the next year, while Australian inflation is expected to be 6%. According to Purchasing Power Parity, calculate how the Australian dollar exchange rate should move.

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