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Find the exporter is assured of swedish krona

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Reference no: EM132951602

An exporter located in Sweden has been asked to accept a payment in 1 years' time of 945,000,000 Rupee for a shipment of trucks to Sri Lanka. Unfortunately, there is no foreign exchange option for Krona-Rupee exchange and the exporter cannot readily find someone to take the other side of a forward contact.

The exporter observes that

  • The Swedish Krona is currently trading at .12 US dollars.
  • The Sri Lankan Rupee is trading at .005 US dollars.
  • A bank in Sri Lanka posts an annual interest rate of 35% on all deposits and loans.
  • A bank in Sweden posts an annual interest rate of 2% on all deposits and loans.

Problem 1: Using the two banks and the current spot rates, the exporter is assured of ___ Swedish Krona for their exports.

Reference no: EM132951602

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