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What are the commodity currency and term currency

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Question - Lisa works and lives in Melbourne. Currently she is considering buying some Coca-Cola Ltd's shares trading on the New York Stock Exchange. The shares are selling at USD 54 per share and she is planning to purchase 1500 shares. She approaches a foreign exchange dealer in Melbourne to exchange her Australian dollars for U.S dollars. The rates advertised by the dealer is: AUD 1 = USD 0.6950-0.7010

What are the commodity currency and term currency in the advertised quote? Is it a direct quotation or an indirect quotation? What is the bid-offer spread for the dealer?

What is the rate at which she can exchange Australian dollars into U.S dollars? Explain why?

How many Australian dollars will she need to purchase 1500 Coca-Cola shares at USD 54 per share given your answer to part b)?

After holding the shares for one year, Lisa received dividends of USD 2000 and she wants to exchange them for Australian dollars. What are the up-side and down-side foreign exchange risks that she may potentially face?

If the exchange rate advertised by the local dealer remains unchanged at AUD 1 = USD 0.6950-0.7010, what is the rate at which she can exchange U.S Dollars into Australian dollars? Explain why?

How many Australian Dollars will she receive for dividends of USD2000 given your answer to part?

Reference no: EM133104700

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