Should the individual trade at the offer or bid rate

Reference no: EM1344690

A company wants to exports goods to France. The goods costs EUR 600,000,000, and payment will take place in one year. The spot rate and interests rates are as follows

Spot: EUR/USD is 1.4176/77 (read as $1.4176-1.4177 per Euro)

USD=1%-1.5%

EUR=2%-2.5%

1) If the individual sells the forward would rate would he receive from a bank for one year forward rate (Show the calculation for the forward rate? Should the individual trade at the offer or bid rate?

2) A. If the individual sells a EUR 600m forward what would be the spot rate from now if EUR/USD is 1.4400? What would be the spot rate is EUR/ USD1.3300?

Reference no: EM1344690

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