A UK importer of Australian crocodile meat owes the Australian exporting company a payment of GBP100 000, due in three months. The following information is available: Spot exchange rate (AUD/GBP) Three-month forward rate 2.5975-2.6025 2.6175-2.6225 (a) Calculate the Australian dollar value of receivables under a forward hedge. (b) If the spot exchange rate in three months is expected to be 2.6475-2.6525, will the hedge be taken? What if it is 2.5475-2.5525?

Answer rating: 100% (QA)

a Well use the upper bound of the threemonth forward rate range 26225 for calculating the Au... View the full answer