Reference no: EM132552487
A Solomon Island based company has a foreign currency invoice payable in Fijian Dollars (FJD) in one month. Due to exchange rate fluctuations, the company's exposure is at risk, hence it decides to enter into a forward exchange contract with its bank. Both countries use a 365-day year; assume 30-day contract.
Given the following data:
FJD/SBD (spot): 15.1234 - 550
One-month Solomon Is. interest rate: 5% p.a.
One-month Fijian interest rate: 4% p.a.
Required:
(Show all working else penalties will apply. Exchange rates should be rounded off to 4.d.p., whereas all other calculator-values are to be rounded off all to 2d.p. Clearly label your answers with corresponding question number and/or its associated parts.)
a. Calculate the SBD/FJD exchange rate.
b. Calculate the forward points.
c. Based on the forward points calculated in (a) above, calculate the forward rate offered by the bank.
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