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How much will Vintnor have to pay for the wine

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Reference no: EM132802963

Problem - SPOT AND FORWARD RATES - Arvin Australian Imports has agreed to purchase 15,000 cases of Australian wine for 4 million Australian dollars at today's spot rate. The firm's financial manager, Sarah Vintnor, has noted the following current spot and forward rates:

 

U.S. Dollar/Australian Dollar

Australian Dollar/U.S. Dollar

Spot

0.7930

1.2610

30-day forward

0.7927

1.2615

90-day forward

0.7921

1.2625

180-day forward

0.7911

1.2640

On the same day, Vintnor agrees to purchase 15,000 more cases of wine in 3 months at the same price of 4 million Australian dollars.

Required -

a. What is the price of the wine in U.S. dollars if it is purchased at today's spot rate?

b. What is the cost in U.S. dollars of the second 15,000 cases if payment is made in 90 days and the spot rate at that time equals today's 90-day forward rate?

c. If the exchange rate for the Australian dollar is 1.20 to $1 in 90 days, how much will Vintnor have to pay for the wine (in U.S. dollars)?

Reference no: EM132802963

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