Question: Amcor Corp. a U. S. company considers a project with the Australian government. If it accepts the project, it will receive one lump sum cash

Amcor Corp. a U. S. company considers a project with the Australian government. If it accepts the project, it will receive one lump sum cash flow of A$700,000 in five years. The spot rate is presently A$1.40. The annualized interest rate for a 5-year period is 4% in the U.S. and 6% in Australia. Interest rate parity exists. Amcor Corp. plans to hedge its cash flows with a forward contract.

What is the forward rate premium that Amcor Corp. will receive in five years if it accepts this project?

What is the forward rate that Amcor Corp. will receive in five years if it accepts this project?

What is the dollar amount of cash flows that Amcor Corp. will receive in five years if it accepts this project?

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